Crypto selloff deepens as bitcoin, ether fall and $1.8B in liquidations hit leveraged traders
Crypto markets tumbled as bitcoin (BTC) and ether (ETH) extended declines amid an accelerating unwind of leveraged positions. BTC and ETH fell about 2.7% and 3.5% overnight, respectively, compounding earlier losses. The rout coincided with sharp drops in precious metals—silver plunged ~20% from its record high and gold fell ~11%—and a stronger U.S. dollar. Roughly $1.8 billion of crypto leverage was liquidated in 24 hours. Open interest across major futures contracts declined, funding rates flipped negative for BTC, ETH and other tokens, and 30-day implied volatility for BTC rose (BVIV from 40% to 47%), signaling heightened demand for hedges. Deribit data showed puts pricier than calls, and traders executed bearish put spreads on BTC and put butterflies on ETH. Bitcoin dominance slipped to ~58.7% as traders rotated into riskier altcoins; notable moves included CC (Canton) gaining ~3.3% while privacy coins XMR, ZEC and DASH fell ~5%. Speculative names saw extreme swings—RIVER lost ~55% since Monday after an 884% January rally. The selloff pressured ETFs and tokenized metal positions, with a $47m long on tokenized silver liquidated. Market indicators point to increased downside hedging and shorting activity, suggesting elevated short-term volatility and constrained risk appetite for leveraged trades.
Bearish
The article describes an accelerating deleveraging event: $1.8B in liquidations, falling open interest, negative funding rates, rising implied volatility, and puts trading richer than calls. Those are classic signs of forced selling and increasing demand for downside protection, which generally exacerbate downside pressure in the short term. Bitcoin and ether declines, combined with a stronger dollar and losses in correlated assets (gold/silver), reduce risk appetite and make leveraged long positions vulnerable. Rotation into altcoins (bitcoin dominance falling) may produce isolated rallies, but wide liquidations and reduced futures OI suggest fragile market liquidity. Historically, similar liquidation cascades (e.g., May 2021, March 2020) led to sharp short-term drawdowns followed by periods of reduced leverage and lower volume before recovery. Therefore the immediate outlook is bearish: expect elevated volatility, tighter bid-ask spreads on stress, and discretion around leverage. Over the medium-to-long term, fundamentals (ETF flows, macro policy) will determine direction; forced deleveraging typically sets the stage for consolidation and eventual recovery only after leverage and volatility subside.