Crypto's $775M Liquidation Wave: A Flow Analysis of the Selloff

The sell-off hit with a precise $775 million liquidation wave over the past 24 hours. This massive capital drain directly fueled a steep price collapse, with Bitcoin falling as much as 7.5 percent and slipping below $71,000. The pressure wasn't isolated to Bitcoin; the broader market lost over $775 million in total liquidations, confirming a broad-based selloff.

The impact rippled through altcoins, where major altcoins, including Ethereum, Ripple, BNB, Solana, and Dogecoin, have averaged an 8% loss over the same period. This widespread weakness underscores the depth of the risk-off sentiment, as selling pressure hit even the largest non-Bitcoin tokens. The liquidation data shows the majority came from long positions, a clear signal of a bearish market tone.

This crypto selloff was not happening in a vacuum. It followed sharp losses in Asian and U.S. tech shares, aligning with a global tech sell-off. The move highlights crypto's role as a high-beta risk asset, amplifying moves in other volatile markets. The price action, with Bitcoin touching lows near $70,700, signals fragile conviction rather than a clear trend reversal.

The Tether Depeg Fear: A Liquidity Drain Catalyst

The immediate catalyst for the selloff was a surge in fear around Tether's USDT. As the dominant stablecoin, USDT accounts for more than 60% of the cryptocurrency stablecoin market capitalization. When its price briefly dipped to $0.998, it triggered a systemic liquidity drain. This depeg fear is a direct threat to the market's core function, as a loss of confidence in the primary on-ramp for trading capital can freeze flows and force a cascade of liquidations.

The sentiment risk is compounded by Tether's own financial report. Its latest quarterly "attestation" showed a significant drop in its 2025 profits while its asset mix grew more complex. This deterioration in asset quality, coupled with a 'weak' stability rating from S&P Global, undermines the fundamental premise of a stablecoin. For a market already in extreme fear, this news erodes the perceived safety net, making traders more likely to exit positions and less likely to enter new ones.

This loss of confidence is reflected in the revised capital raise plan. After initial talks for a $15 billion to $20 billion fundraise, advisers are now floating a $5 billion target. This represents a 75% reduction and signals investor caution. The scaled-back plan, framed as a "misconception" by Tether, is a tangible flow impact. It suggests that even a highly profitable issuer faces a premium for capital in a risk-off environment, further pressuring the market's liquidity pool.

Catalysts and Risks: What to Watch

The immediate technical battleground is the $70,000 support level. Bitcoin's recent plunge to lows near $70,700 shows how fragile this floor is. A decisive break below that psychological and technical barrier would likely trigger another wave of cascading liquidations, as margin calls force more selling. The market's path hinges on whether this level holds or capitulates.

Monitoring Tether's stability remains critical for depeg risk resolution. The issuer's significant drop in 2025 profits and its complex, non-traditional asset mix create a fundamental vulnerability. Any further deterioration in its reserve quality or a regulatory crackdown could reignite depeg fears, freezing liquidity and pressuring the entire market. Watch for transparency updates or formal audit demands.

The broader market's risk appetite, as reflected in the Fear & Greed Index falling to 11, will dictate the pace of recovery. Extreme fear signals a risk-off environment where capital is fleeing to safety. Until sentiment stabilizes and the index moves out of the "extreme fear" zone, buying pressure will remain weak. The market's next move is a direct function of this emotional gauge.