Cryptocurrency markets experienced a severe downturn on Monday as more than $1.5 billion in leveraged long positions were forcibly liquidated, driving a broad selloff across major tokens. According to blockchain analytics from Coinglass, nearly half a billion dollars of long Ether positions were unwound in the space of hours, pushing Ether prices down by nearly 9% to a low of $4,075. Bitcoin also fell approximately 3%, dipping below $112,000 before finding support near $111,500.
The cascading liquidations impacted a wide array of tokens beyond the top two. Layer-1 platforms such as Solana and Avalanche saw plunges of 10% or more, while mid-cap DeFi tokens including Algorand and Polygon recorded double-digit losses. Derivatives markets reflected the turmoil, with open interest in key perpetual swap contracts contracting by 7% as unstable funding rates and widening basis marked heightened trader anxiety.
On-chain data revealed that automated liquidation bots executed millions of dollars in margin calls across major centralized exchanges. The resulting spike in sell orders overwhelmed liquidity pools, exacerbating price declines on both spot and futures platforms. Market participants noted that declining funding rates, which turned negative for Ether for the first time since June, signaled a shift in sentiment from bullish to bearish among derivative traders.
Industry analysts characterized the episode as a “circuit breaker” event for overleveraged positions, arguing that such forced deleveraging may pave the way for a more sustainable recovery. Some veteran traders pointed to historical precedents—such as the March 2020 market crash—where sharp corrections ultimately cleared excess leverage and set the stage for renewed upward momentum.
Traditional equity markets also felt the reverberations, with crypto-focused stocks underperforming broader indexes. Shares of Coinbase and MicroStrategy declined 4% and 6%, respectively, while ETFs tracking digital assets saw net outflows of $120 million. Survey data from market-making firms indicated that institutional treasury allocations to digital assets have paused, awaiting clearer technical signs before reentering positions.
Despite the volatility, proponents of digital assets highlighted long-term on-chain metrics that remained resilient. Network activity on Ethereum measured by unique daily addresses hovered near multi-week highs, and stablecoin transaction volumes held steady, reflecting continued utility demand. On Solana, daily transaction counts rebounded on the heels of recent network optimizations, though average fees edged lower amid reduced speculative trading.
Broader macroeconomic factors continued to weigh on risk assets. Federal Reserve speakers this week are expected to provide fresh insights into the timing of potential rate cuts, while upcoming U.S. PCE inflation data looms as a catalyst. Market participants will monitor whether policy pivots can restore confidence or whether lingering rate-cut uncertainty will prolong pressure on digital asset valuations.
As markets consolidated near midday, some buyers emerged at key technical supports, suggesting that the worst of the forced liquidations may have passed. However, volatility gauges such as the Ether implied volatility index (EVIX) pierced 75%, hitting levels unseen since August, and signaling that traders remain cautious. The coming days will test whether recuperation efforts can gather momentum or whether fresh catalysts will trigger further downside.
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