Crypto market plunges as Bitcoin slides to $109K and altcoins face heavy losses

The cryptocurrency market faced another bruising session as Bitcoin ($BTC) fell back to the $109,000 mark, intensifying fears of a deeper downturn.

The global digital asset market capitalisation slipped by 2% in the past 24 hours, now standing at roughly $3.8 trillion. 

This downturn triggered widespread pain across leveraged traders, with over $900 million worth of positions liquidated in a single day, affecting more than 200,000 traders.

Ethereum ($ETH), which had outperformed Bitcoin for several weeks, bore the brunt of the crash. After nearing the $5,000 threshold earlier this month, ETH slipped towards $4,400, giving back much of its recent gains driven by investor optimism after the Jackson Hole meeting. 

According to CoinGlass data, around $320 million worth of ETH long and short positions were wiped out.

Despite the setback, Ethereum remains the stronger performer in the medium term. Over the past 60 days, ETH is still up by 80%, while Bitcoin has managed only a 3% gain. But the recent turbulence has shaken investor confidence.

“ETH ETFs continued to outpace BTC ETFs in inflows, highlighting a significant rotational shift towards Ethereum driven by its yield-generating capabilities, regulatory clarity, and growing corporate treasury adoption”, said the director at LVRG Research, Nick Ruck.

Ethereum’s total value locked (TVL) also slipped by 3.63% in the past day, now standing at $92.02 billion according to DefiLlama. The fall reflects slowing participation across decentralised finance (DeFi) protocols, which has lagged behind ETH’s surging price. 

While ETH recently hit an all-time high of $4,946, its on-chain activity tells a different story. TVL remains well below its $108 billion peak in November 2021, with just under 21 million ETH locked,  a sharp decline from 29.2 million ETH in July 2021.

“The market is waking up to the utility of Ethereum as a blockchain and the huge opportunity this presents. Sub-$5,000 ETH could soon be history”, said founder of RAAC, Kevin Rusher. 

Bitcoin momentum fades

Bitcoin’s decline below $110,000 marks its lowest level in over six weeks, sparking concerns about a potential loss of bullish momentum. 

A Glassnode report shows that the spot market is weakening as Bitcoin’s RSI slipped towards oversold conditions over the past week.

At the same time, futures open interest (OI) fell 2.6% to $45.9 billion as leverage unwound, while options skew spiked to 8.2%, signalling rising demand for downside protection. 

ETFs also reported notable weakness, with spot Bitcoin ETF flows recording $1 billion in outflows over recent sessions.

On-chain activity paints a similar picture of declining demand. Active Bitcoin addresses dropped 2% to 692,000, while transaction fees fell 17%, indicating reduced competition for blockspace. 

Over the last week alone, BTC prices are down 5%, trading at an average price of $109,728 at the time of writing.

Institutional behaviour, however, suggests a nuanced outlook. Spot Ethereum ETFs in the US recorded $443.9 million in daily net inflows on Monday, marking their third consecutive positive session. 

BlackRock’s ETHA fund alone saw $314.9 million, followed by Fidelity’s FETH with $87.4 million, while other providers like Grayscale, Bitwise, 21Shares, and Invesco reported additional inflows.

Interestingly, inflows into ETH ETFs were more than double those into Bitcoin ETFs on the same day, highlighting shifting investor preferences. 

After a six-day outflow streak, Bitcoin ETFs finally returned to positive territory with $219 million net inflows combined from BlackRock, Fidelity, and four other funds.

“Despite market declines, both Bitcoin and Ethereum ETFs saw notable inflows on Monday, suggesting institutional confidence remains strong amid the downturn”, Nick Ruck said.

Still, macroeconomic factors weigh heavily on investor sentiment. Analysts suggest that the optimism sparked by Federal Reserve Chair Jerome Powell’s dovish remarks last Friday has faded, as markets turn cautious amid growing economic uncertainties.

Institutional capital rotates to Ethereum

Ethereum’s sharp rebound earlier this month reignited speculation that the second-largest cryptocurrency could drive the next altcoin season. 

As ETH pushed past $4,300, analysts identified a surge of whale activity, with over $2 billion worth of Bitcoin converted into Ethereum in recent days, according to on-chain data.

This rotation reflects a growing belief among institutions that Ethereum’s staking yield and expanding role in DeFi and real-world asset tokenisation (RWA) provide a stronger value proposition compared to Bitcoin’s store-of-value narrative.

“Unlike Bitcoin, ETH allows holders to earn passive income through staking.This dual benefit — capital appreciation and yield — is drawing institutional attention at a rapid pace”, explained the CEO of Bitget, Gracy Chen.

Chen expects Bitcoin to trade in the $110,000–$120,000 range over the next couple of weeks but sees Ethereum as better positioned to outperform. 

She projects ETH could move within the $4,600–$5,200 range, with growing on-chain demand supporting the rally.

Ethereum’s position as a key infrastructure layer is also gaining recognition among policymakers. 

According to Rusher, the European Union is reportedly considering using Ethereum as the foundation for its digital Euro project. This development could cement ETH’s standing as the institutional blockchain of choice.

“Digital asset treasuries are allocating more aggressively to ETH. Combined with potential rate cuts from the Federal Reserve and sustained ETF inflows, we could see fiery demand for ETH in the months ahead”, Rusher added, referring to corporate funds prioritising Ethereum for DeFi and RWA integration.

However, the divergence between Ethereum’s price performance and on-chain activity remains a key dynamic shaping the market. Decentralised exchanges (DEXs) and perpetual futures volumes remain active but haven’t reclaimed their peaks from 2021. 

The rise of layer 2 scaling solutions like Base, Arbitrum, and Optimism is also reshaping liquidity distribution, pulling capital away from Ethereum’s base layer.

“Despite ETH reaching record new highs, its TVL remains below past records due to a combination of more efficient protocols and infrastructure, as well as increased competition from other chains amid a lull in retail participation”, said Ruck in a Telegram message.

Back in 2020 and 2021, TVL growth defined Ethereum’s dominance, driven by the frenzy of “DeFi Summer” and the explosive rise of yield farming protocols like Maker, Aave, and Curve. But this cycle is being shaped differently. 

ETF inflows, institutional allocations, and macroeconomic positioning have become the dominant catalysts, with ETH-related ETF assets climbing from $8 billion in January to over $28 billion this week.

For now, institutional flows are providing a solid foundation for Ethereum’s price performance, even as grassroots DeFi engagement lags behind. 

ETH is increasingly behaving like a macro-driven asset, reflecting broader investment strategies rather than retail speculation.