Crypto Market Faces $2.23 Billion Liquidation Wave in 2025

The crypto market faced a tumultuous start to 2025, with a significant wave of liquidations hitting long positions hard. The first six months of the year saw intense market activity, driven by a series of unexpected events that led to a sharp reversal in market sentiment. Traders who had bet on rising prices found themselves in a severe reckoning as automated position closures swept across trading platforms.

One of the most notable events occurred on February 3, when approximately $2.23 billion worth of leveraged crypto positions were liquidated. Long trades bore the brunt of this, with around $1.88 billion in positions being cleared out. This event impacted over 729,000 traders in a single day, highlighting the widespread nature of the liquidations. The sudden market shock was triggered by an unexpected announcement from the U.S. President, who imposed a new set of trade tariffs. This decision sent shockwaves through financial markets, leading to mass selling and the unwinding of risky positions in the crypto sector.

The market turmoil continued into late February, with additional factors exacerbating the situation. On February 25, the administration confirmed plans to proceed with the trade tariffs, further shaking investor confidence. This was compounded by a profit warning from a major retailer and a more aggressive tone from the Federal Reserve regarding future policy. These developments led to about $1.57 billion in liquidations, with long positions once again absorbing most of the damage. The broader altcoin market, including tokens like Solana, experienced steep declines, with Solana's value plunging by more than 50% by the end of February. This triggered over $150 million in liquidations tied to its perpetual futures contracts.

The sell-off persisted into early March, with prices sinking across the board. Bitcoin briefly dropped as low as $82,000, and many major digital assets reached levels not seen in several months. However, by April 7, the market had reached a fresh yearly low, and most overleveraged long positions had been flushed out. This reduction in excess risk created room for a possible rebound. Historically, large-scale liquidation of long positions tends to release leverage risk and stabilize the market, facilitating the formation of a bottom and initiating a “post-deleveraging recovery” phase.

Signs of recovery began to emerge later in April. On April 23, the market recorded its largest short liquidation of the year, with over $600 million cleared—about 88% of total liquidations that day. Despite this shift, long liquidations remained far larger overall during the period. Even at their peak, short losses never came close to the massive long wipeouts seen in early February. This imbalance was noted as a sign that bullish sentiment remained strong throughout the market.

As of now, the crypto market is showing signs of stabilization and recovery. Bitcoin is currently trading around $111,000, after closing above $112,000 just yesterday—a new all-time high. Ethereum is also gaining ground, rising over 6% in the past 24 hours. Other digital assets are following suit, pointing to renewed strength across the broader digital asset space. The market's resilience in the face of significant liquidations suggests that a rebound may be underway, as traders and investors look to capitalize on the reduced leverage risk and improving sentiment.