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Crypto Faces $1.6 Billion in Liquidations: Is This Deleveraging Essential for Market Stability?

Crypto Faces $1.6 Billion in Liquidations: Is This Deleveraging Essential for Market Stability?

Bitget-RWA2025/09/27 02:34
By:Coin World

- In late September 2025, crypto markets saw $1.6B in leveraged positions liquidated, with Bitcoin and Ethereum leading losses. - Overleveraged long bets, macroeconomic pressures, and weak ETF inflows triggered a 407,000-position collapse, 94% longs liquidated. - Analysts called it a "healthy correction," emphasizing Bitcoin’s need to hold $105,000 support amid ongoing macroeconomic risks.

Crypto Faces $1.6 Billion in Liquidations: Is This Deleveraging Essential for Market Stability? image 0

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According to data from Coinglass and Bitget, the cryptocurrency sector saw an unprecedented liquidation in late September 2025, with leveraged positions worth more than $1.6 billion erased in just one day.

(BTC) and (ETH) were hit hardest, suffering liquidations of $276 million and $483 million, respectively. This downturn was set off by a mix of excessive leverage, challenging macroeconomic conditions, and shallow liquidity, all of which intensified the pressure on a market already weakened by falling ETF inflows and a strengthening U.S. dollar.

Bitcoin’s price dropped to $108,600, marking its lowest point in nearly a month, while Ethereum slid 8.5% to near $3,800. The steep sell-off led to the forced closure of 407,000 leveraged trades, with 94% of those being long positions. Technical signals pointed to a bearish trend: Bitcoin’s RSI fell to 42.23, approaching oversold levels, and Ethereum’s RSI reached 38.76. Blockchain data showed a spike in short liquidations, hinting at possible short squeezes as traders rushed to exit risky positions.

This wave of liquidations was driven by several factors. First, high leverage in derivatives markets magnified price volatility, with open interest peaking at $1.04 trillion. Second, macroeconomic uncertainty—such as unclear U.S. Federal Reserve policy and rising interest rates—fueled a risk-averse mood. Third, institutional demand for crypto ETFs waned, as shown by an 87% decrease in inflows compared to the 30-day average, removing a key support for Bitcoin. The U.S. dollar’s rally (DXY index at 108.7) further reduced demand for alternative assets, worsening the sell-off.

Alternative cryptocurrencies were even more severely affected, with

(SOL) and (DOGE) tumbling by 21% and 21.1%, respectively. The total crypto market capitalization shrank by $150 billion to $3.70 trillion, reflecting a broader move toward safer assets. Institutional participation also fell, as corporate buyers cut their Bitcoin acquisitions by 76% compared to the previous month. This was a sharp reversal from the buying frenzy earlier in 2025 that had propelled both and to all-time highs.

Experts described the event as a necessary reduction in leverage. "This correction is healthy, as it flushes out excessive risk and helps stabilize the market," commented Linh Tran from XS.com. Arthur Azizov of B2 Ventures observed that Bitcoin’s drop below $111,000 indicated an "overheated" market entering a cooling phase. The Crypto Fear and Greed Index plunged to 12, its lowest reading since the March 2025 downturn, signaling extreme pessimism among investors.

Looking forward, the market stands at a pivotal point. Bitcoin needs to maintain support at key levels, such as $105,000 (the 200-day moving average), to prevent further losses. For Ethereum, the 50-day EMA at $4,100 is another important benchmark. Although historical trends suggest October might bring a rebound, short-term risks remain high due to ongoing macroeconomic instability and regulatory ambiguity. Traders are encouraged to take a cautious approach, using less leverage and diversifying their holdings as the market navigates this period of volatility.

This liquidation episode highlights the significant dangers of leveraged trading in crypto, where rapid margin calls can lead to cascading sell-offs. As both institutional and retail investors reconsider their positions, recovery will depend on renewed buying interest, clearer regulations, and the ability of major cryptocurrencies to find stability. For now, attention is focused on whether Bitcoin can reclaim the $111,000 mark—a level that could shape the next chapter for this unpredictable market.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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