The week started on a rough note for the cryptocurrency market, with sharp sell-offs leading to one of the largest liquidation events in recent history. More than $1.7 billion worth of positions across major digital assets were wiped out, according to data from Coinglass.
Liquidations take place when a trading account no longer has enough margin to cover ongoing losses, forcing traders to automatically close open positions. These events often trigger a domino effect during periods of high volatility, leading to sharper moves in the market.
The majority of the wipeout came from long positions, accounting for nearly $1.62 billion of the total. Ethereum bore the heaviest blow, losing close to $483 million in just half a day, followed by Bitcoin with nearly $280 million in forced closures during the same period.
More than 404,000 traders went into liquidation, highlighting just how widespread the impact was. The largest single order to be closed was a Bitcoin-to-Tether swap worth $12.74 million on OKX.
In terms of price action, Bitcoin lost around 2.5%, falling to under $113,000, while Ether dropped by 7% to $4,100. Solana and XRP also fell more than 7%, while Hyperliquid and Dogecoin shed over 10%, reversing the short-lived gains seen after the U.S. Federal Reserve’s most recent policy update.
The markets were moving upward with optimism before the Fed announced a rate cut on September 17. The announcement initially sparked enthusiasm, but concerns about a possible economic downturn quickly shifted momentum.
Some investors remain hopeful, however, that a new rate cut could provide a much-needed boost, potentially turning the market’s “Redtember” slump into a more positive “Uptober.” Historical patterns show that ten out of the past twelve Octobers have brought bullish performance, with the last six in a row producing significant rallies.
Arthur Hayes, co-founder of BitMEX, suggested that a major upward cycle may arrive once the United States Treasury General Account gets to $850 billion. This account is essentially the government’s balance with the Fed.
To build that balance, the Treasury has been issuing new debt and selling bonds, which removes liquidity from markets. Once the account is topped up, that drain is expected to slow. However, it remains uncertain whether hitting the threshold will directly inject new capital into markets. Still, the expectation alone could encourage investors to take on more risk, setting the stage for a potential crypto rebound.
Leading crypto firms like Riot Platforms Inc. (NASDAQ: RIOT) will be hoping the liquidations are just a passing cloud that will not have a sustained effect on the industry at this time when the regulatory environment is turning favorable for further growth within the industry.
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