Ethereum News Today: Mechanical Bear Market: $2B Crypto Liquidations Expose Leverage's Peril

The cryptocurrency market endured a harrowing 24-hour period as nearly $2 billion in trader positions were liquidated, with Ethereum (ETH) suffering some of the largest losses. Bitcoin (BTC) accounted for nearly half of the total liquidations, while ETH longs were hit by over $403 million in forced exits. The sell-off, driven by a cascade of leveraged positions being closed, saw Ethereum fall below $2,900 for the first time in months according to Coinglass data.

The liquidation wave disproportionately impacted leveraged longs, with over 391,000 traders wiped out as the total crypto market capitalization dropped below $3 trillion. Long positions represented $1.78 billion of the total liquidated, compared to just $129 million in shorts. Among the most notable casualties was the "Anti-CZ Whale," whose ETH and XRP longs were liquidated in a single day, erasing profits accumulated over 10 days. Another high-profile figure, Machi, saw his account shrink to $15,538 after being liquidated, with total losses exceeding $20 million according to reports.

The ETH sell-off was exacerbated by broader macroeconomic pressures. Surging Japanese 10-year yields, which spiked following aggressive monetary stimulus, triggered a global liquidity crunch, weighing heavily on crypto assets. Analysts noted that dynamic asset tokens were unwinding, with Bitcoin's valuation triggering accelerated sell pressure. Additionally, whispers of a major prop firm or market maker teetering on the brink of collapse-similar to the 2022 FTX crisis-added to the market's unease.

The collapse also unfolded against a backdrop of algorithmic selling. The S&P 500 lost $1.5 trillion in value within 100 minutes earlier in the week, as Goldman Sachs attributed the move to automated trading systems reacting to key market levels breaking. This "mechanical bear market," as described by The Kobeissi Letter, is characterized by a feedback loop where leveraged traders are forced to sell as prices fall, further driving down asset values.

Ethereum's price action underscored the severity of the downturn. On Binance, ETH fell to $2,851.83, a 5.28% drop in 24 hours. The largest single liquidation event occurred on Hyperliquid, where a $36.78 million BTC-USD position was closed. While Bitcoin and Ethereum led the liquidations, the broader market's collapse highlighted the interconnectedness of crypto and traditional finance, with volatility spilling into institutional asset tokenization initiatives according to data.