Bitcoin News Today: 180,000 Traders Wiped Out in Crypto's $16B Liquidation Frenzy

The cryptocurrency market experienced a record $16 billion in leveraged long position liquidations during an overnight sell-off, marking the largest single-day liquidation event in crypto history. The collapse disproportionately impacted major assets, with Bitcoin (BTC), Ethereum (ETH), XRP, and Solana (SOL) seeing forced closures of leveraged bullish bets as prices plummeted. XRP and altcoins dropped between 20% to 40%, while BTC and ETH fell to multi-month lows amid cascading liquidations. The event triggered a "multi-step bottoming process," according to Zaheer Ebtikar, chief investment officer at Split Capital, as market makers temporarily withdrew liquidity and arbitrage activity between spot and futures markets delayed a rebound.

The liquidation shock unfolded as exchanges struggled with data feed delays and order book outages during heightened volatility. Market makers, which typically provide liquidity, paused operations to address price discrepancies between spot and perpetual futures markets. This phase of "data feed stabilization" allowed large traders to absorb sell orders, but the sheer scale of forced liquidations-spanning $68 million in BTC longs alone-extended the stabilization period. Ebtikar noted that market makers would eventually unwind long positions accumulated during the crash, a process likely to slow further over the weekend due to reduced liquidity from closed spot ETFs.

The recovery timeline faces additional headwinds. U.S.-China trade tensions, which worsened in the days preceding the crash, remain a critical risk factor. Analysts at Coindesk highlighted that geopolitical tensions could prolong the market's consolidation phase, with altcoins like XRP and SOL facing prolonged pressure due to their limited supply dynamics. Meanwhile, the U.S. government shutdown raised uncertainties about regulatory approvals for altcoin ETFs, compounding volatility for speculative assets.

On-chain data revealed over 180,000 traders were liquidated in the 24-hour period, with BTC accounting for $160 million in losses and ETH seeing $170 million in forced closures. The sell-off was exacerbated by profit-taking after recent all-time highs and macroeconomic concerns, including weak performance in tech stocks and fears of an AI-driven market bubble. Analysts at On-chain Lens attributed the downturn to a "domino effect," where exchanges sold assets to cover margin calls, further depressing prices.

The market's gradual recovery is expected to test investor patience, with liquidity challenges persisting until key support levels are tested. Ebtikar emphasized that market makers would likely trigger a local maxima once they begin unwinding positions, though this process could span several days. The broader crypto market, now valued at $4.23 trillion, remains in a neutral sentiment zone, with the fear and greed index at 54-a sign of cautious optimism.