The cryptocurrency market has taken a sharp downturn, with nearly $1 billion in liquidations wiping out traders’ positions.
Bitcoin ($BTC) and Ethereum ($ETH) have been hit the hardest, pushing the overall market capitalisation down to $2.62 trillion.
The sudden crash has led to fear among investors, as reflected in the Fear & Greed Index, which has dropped to 17, indicating ‘Extreme Fear’.
Recent data from Coinglass shows that 320,374 traders have faced liquidations in the past 24 hours, leading to total losses of $907.7 million.
Long traders, who had bet that prices would go up, suffered the most, losing around $72 million. However, short traders, who had expected prices to fall, also faced losses amounting to $179 million.
The largest single liquidation order was on Bybit, where a BTC/USD trade worth $5.26 million was wiped out instantly. Bitcoin traders experienced the biggest losses, with $318.2 million in positions being liquidated.
Out of this, $235 million came from traders who were optimistic about Bitcoin’s price, while $82.6 million was lost by those who had bet against it.
At present, Bitcoin is trading around $81,632 and is approaching a crucial support level at $78,000. This has raised concerns that if prices fall below this level, Bitcoin could decline even further.
The Co-founder of BitMEX, Arthur Hayes, has warned that Bitcoin could test levels between $70,000 and $75,000, adding more uncertainty to the market.
Ethereum has also been affected, with its price falling 8.4% in just 24 hours, bringing it down to $1,915. This is the lowest level Ethereum has seen since late 2023.
What is causing the market downturn?
Several factors have contributed to the sudden decline in the crypto market. One of the biggest concerns among investors is the possibility of a recession.
In a recent interview with Fox News, US President Donald Trump spoke about an economic “transition period”. His comments have made investors nervous, as they worry about what lies ahead for the economy.
Another major reason for the sell-off is the large amount of Bitcoin being moved by the now-defunct Mt. Gox exchange. Recently, Mt. Gox transferred 11,834 $BTC, worth $931.1 million, followed by another 332 $BTC, worth $26.6 million.
This has led to fears that more Bitcoin could be sold on the market, increasing selling pressure and pushing prices down further.
Ethereum traders are also concerned after reports showed large amounts of $ETH being moved by big holders. One whale deposited 7,000 $ETH, worth $12.9 million, to the Kraken exchange, while another transferred 21,000 $ETH to Binance.
These transactions suggest that major investors may be preparing to sell their holdings, which could further drive prices down.
Regulatory changes and investor sentiment
Aside from market factors, new regulations in Europe are also playing a role in the crypto market’s decline. The Markets in Crypto-Assets (MiCA) regulation is set to take full effect at the beginning of the second quarter.
Under these rules, most exchanges operating in Europe will be required to delist stablecoins that do not comply with MiCA regulations.
“As a result, most exchanges operating legally in Europe will delist all non-MiCA-compliant stablecoins by the end of the month”, said the Research Analyst at Fineqia International, Matteo Greco. “This includes major stablecoins such as USDT, DAI, and PAXG”, Greco added.
This regulatory shift is expected to make $USDC the dominant stablecoin in Europe, as its issuer, Circle, has already secured the necessary licensing.
Meanwhile, cryptocurrency exchange-traded products (ETPs) have also been experiencing continuous outflows. Investors withdrew $876 million from ETPs in the past week, marking the fourth straight week of outflows.
In total, the market has lost $4.75 billion in the last month, bringing total year-to-date inflows down to $2.6 billion.
According to a report from CoinShares, assets under management (AUM) have now dropped by $39 billion to $142 billion— the lowest level since November 2024.
Bitcoin ETPs saw the biggest outflows, with investors pulling out $756 million. Ethereum ETPs followed with outflows of $89.2 million.
Interestingly, short-Bitcoin ETPs, which benefit when Bitcoin prices fall, also saw $19.8 million in withdrawals. This suggests that investors are uncertain about where the market is headed.
Other cryptocurrencies also saw major outflows, including Tron ($32 million) and Aave ($2.4 million). However, some altcoins, such as Solana ($SOL), XRP, and Sui ($SUI), recorded inflows, suggesting that some investors still see value in them.
Among ETP providers, Fidelity Investments had the highest outflows, with $201 million withdrawn last week, bringing its total year-to-date outflows to $159 million. BlackRock’s iShares ETFs followed closely, losing $193 million in the same period.
ARK Invest and 21Shares also experienced outflows of $164 million, although their year-to-date net flows remain positive at $110 million. In contrast, ProShares ETFs recorded $15 million in inflows.
James Butterfill, who authored the CoinShares report, noted that US investors were the most bearish, withdrawing $922 million.
However, other regions, such as Switzerland, Canada, and Germany, saw inflows of $23 million, $14.7 million, and $13.3 million, respectively, indicating that some investors outside the US are still optimistic about crypto’s future.
What’s next for the crypto market?
The recent market downturn has led to extreme panic among investors, with liquidations happening at a massive scale.
Traders with long positions were particularly hard-hit, as they had expected prices to continue rising. Instead, the sudden drop wiped out their positions, causing many to exit the market at a loss.
The sell-off has been worsened by large cryptocurrency movements from major players. The Mt. Gox Bitcoin transfers and Ethereum whale transactions have made investors nervous, fearing that even more sell-offs could be coming.
Adding to the uncertainty, Trump’s recent economic comments have spooked investors, making them cautious about the overall financial market.
This has affected not just cryptocurrencies but also traditional financial markets, with stock prices experiencing turbulence as well.
Bitcoin’s recent price action suggests that further losses could be ahead. The leading cryptocurrency briefly touched a multi-month low before recovering slightly, but analysts warn that unless buyers step in, the downtrend could continue. Ethereum, too, has suffered a significant reversal, reaching its lowest point in months.
Many traders were caught off guard by the rapid liquidations. Overleveraged positions, where traders borrowed money to trade, made the crash even worse.
As prices fell, more and more positions were automatically liquidated, creating a chain reaction that pushed the market further down.
Despite the uncertainty, some long-term investors see the current situation as a potential buying opportunity.
Historically, large price corrections have been followed by strong recoveries. However, with upcoming regulatory changes and concerns about the global economy, the crypto market remains highly unpredictable.
For now, traders are watching closely to see if prices stabilise or if another wave of sell-offs will push Bitcoin and Ethereum even lower.
