Leverage Washout Triggers Crypto Exodus, Bitcoin Dominance Surges to 57.7%

The cryptocurrency market experienced a significant reset after $1.7 billion in leveraged positions were liquidated in a 24-hour period, triggering a sharp sell-off in Bitcoin (BTC) and Ethereum (ETH). Bitcoin dropped below $112,000, its lowest level since early September, while Ethereum fell nearly 3%, with both assets facing heightened selling pressureGate Research: Crypto Market Sees Over $1.7B in Daily Liquidations, AIC Surges Over 71%^[1]. The liquidations, concentrated in long positions, were driven by a combination of technical breakdowns, macroeconomic uncertainty, and surging U.S. Treasury yieldsCNBC: Here Are Five Key Takeaways from the Fed’s Big Interest Rate Decision^[5]. Analysts at QCP Group noted that the volatility marked a “leverage washout” rather than a fundamental shift, with traders rotating capital back into Bitcoin ahead of historically strong October performance, dubbed “Uptober”Yahoo Finance: Bitcoin Ready for ‘Uptober’ Rally After $1.7B Liquidations Reset^[2].

Market sentiment shifted as Bitcoin’s dominance index rose to 57.7%, reflecting a flight to safety from altcoins. Ethereum’s share of the market fell to 13%, while tokens like Solana (SOL) and Dogecoin (DOGE) dropped over 10%CNBC: Here Are Five Key Takeaways from the Fed’s Big Interest Rate Decision^[5]. The Fear & Greed Index, a sentiment indicator, fell to 43, remaining in the “fear” zone as traders cut riskier betsGate Research: Crypto Market Sees Over $1.7B in Daily Liquidations, AIC Surges Over 71%^[1]. Despite the turmoil, QCP Group suggested the selloff could create a base for a seasonal rally, provided Bitcoin stabilizes above key support levels such as $112,500Yahoo Finance: Bitcoin Ready for ‘Uptober’ Rally After $1.7B Liquidations Reset^[2].

The Federal Reserve’s recent 0.25 percentage point rate cut to a target range of 4%-4.25% added complexity to the market outlookNew York Times: Powell Stresses ‘Challenging Situation’ for Fed as Rate Debate^[6]. While the move aimed to ease borrowing costs amid a slowing labor market, officials signaled only two additional cuts in 2025 and one in 2026, reflecting a cautious approach to balancing inflation and employment risksCNBC: ‘Transitory’ Is Back as the Fed Doesn’t Expect Tariffs to Have Long-Lasting Inflation Impacts^[7]. Fed Chair Jerome Powell emphasized the “challenging situation” of managing inflation while avoiding unnecessary labor market softening. The central bank’s projections also highlighted a potential “transitory” nature of tariff-driven inflation, a term that drew mixed reactions from analysts.

Capital flows further underscored the shift toward Bitcoin. Japanese firm Metaplanet became the fifth-largest public holder of Bitcoin after purchasing 5,419 BTC at an average price of $116,724, boosting its holdings to $2.71 billionGate Research: Crypto Market Sees Over $1.7B in Daily Liquidations, AIC Surges Over 71%^[1]. Meanwhile, Japanese firm Capital B added 551 BTC, though both companies saw share prices decline, reflecting broader investor skepticism about their long-term value propositionsGate Research: Crypto Market Sees Over $1.7B in Daily Liquidations, AIC Surges Over 71%^[1].

Macro markets mirrored the crypto selloff, with gold hitting a record high of $3,721 as investors sought safe-haven assetsGate Research: Crypto Market Sees Over $1.7B in Daily Liquidations, AIC Surges Over 71%^[1]. The divergence between Bitcoin’s decline and gold’s rally highlighted shifting risk preferences amid macroeconomic uncertainty. Analysts suggested the rotation signaled a temporary reallocation of capital rather than a permanent trend, with Bitcoin’s dominance likely to remain elevated until leveraged positions are unwoundCNBC: Here Are Five Key Takeaways from the Fed’s Big Interest Rate Decision^[5].

The market’s path forward hinges on key economic data and Fed policy signals. Upcoming U.S. PCE inflation figures and employment reports will be critical in determining whether the Fed accelerates rate cuts or tightens furtherCNBC: ‘Transitory’ Is Back as the Fed Doesn’t Expect Tariffs to Have Long-Lasting Inflation Impacts^[7]. For now, the crypto market appears in a consolidation phase, with Bitcoin’s ability to reclaim $112,500–113,000 seen as a pivotal test of buyer resilienceGate Research: Crypto Market Sees Over $1.7B in Daily Liquidations, AIC Surges Over 71%^[1].