Why Is Crypto Down Today? Nearly $1 Billion in Leveraged Positions Just Got Wiped Out.
A wave of forced liquidations just tore through the crypto market, hitting every major coin at once, and Bitcoin is now clinging to a support zone that could determine whether the selling stops here or accelerates into something far worse.
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Crypto traders who borrowed funds to boost their positions faced significant losses, with nearly $1 billion in positions liquidated as Bitcoin (CRYPTO:BTC), Ethereum (CRYPTO:ETH), and XRP (CRYPTO:XRP) fell. This forced selling largely explains today’s crypto decline, dragging down all 26 of the largest cryptocurrencies we track.
Today, Bitcoin trades at $80,957, down 3.2% after hitting a high of $84,025 in the previous session. This drop follows another round of liquidations amounting to $771 million just two days prior, indicating a troubling pattern of forced selling in just a short span.
How Nearly $1 Billion in Liquidations Dragged Crypto Lower
The recent selloff is largely due to forced liquidations. Traders often take leveraged positions, which means they borrow money to increase their investment power. However, if the market moves against them, exchanges automatically close their positions to limit losses, a process known as liquidation.
Each liquidation adds downward pressure on the price, potentially triggering further liquidations in a domino effect called a liquidation cascade. This chain reaction can lead to significant market declines even when there isn’t a specific piece of bad news to point to. The nearly $1 billion in liquidated positions shows how severe this cascade became.
This forced selling impacted the entire market. Ethereum dropped 5.8% to $2,365, XRP fell 5% to $1.31, and Solana (CRYPTO:SOL) fell 4.9% to $102. Overall, the total cryptocurrency market cap fell by 5.5% on the day. Smaller coins, like Zcash (CRYPTO:ZEC), plummeted by 12.6%, and NEAR (CRYPTO:NEAR) dropped 10.1%.
The difference in declines among cryptocurrencies can be attributed to leverage and the depth of their order books. An order book lists buy orders at different prices, and smaller coins typically have fewer buyers, making them more vulnerable to price drops. Ethereum’s market is somewhat more stable than Zcash’s, but it still felt the pressure, with a 5.8% drop.
Korean Stocks, US Inflation and Fund Outflows Added to the Selling
Additional factors outside the crypto space contributed to this market downturn. South Korea’s main index, the KOSPI, dropped 8%, marking its second significant decline in less than a week after a prior 6.1% drop.
In the United States, inflation was reported at 3.7%. This inflation data, alongside the decline in South Korean stocks, adds to uncertainty about future interest rates, further fueling the downward trend in crypto. However, a liquidation cascade drove the price drops.
Among large fund investors, the trend continued. On October 14, spot Bitcoin funds, which hold Bitcoin directly, experienced net outflows of $261.46 million, indicating that more investors pulled out than invested. Spot Ethereum funds also saw net outflows of $129.51 million during the same period, intensifying selling pressure.
Bitcoin Is Now Inside Its $80,000 to $81,000 Support Zone
Bitcoin now hovers around the crucial $80,000 to $81,000 support zone, where buyers have previously stepped in and where many expect them to act again as prices decline.
Currently priced at $80,957, Bitcoin is just 1.2% above the $80,000 mark. However, support zones can fail if selling pressure continues, especially with ongoing liquidations.
If Bitcoin dips below this zone, traders will look to the 50-week moving average at $76,618, about 5.4% below today’s price. Moving averages smooth out price fluctuations by averaging closing prices over a defined period, and they often attract buyers during pullbacks. Nonetheless, aggressive selling can break through these averages as well.
Why Is Crypto Down Today, and Is the Selling Just Beginning?
We believe this situation resembles a liquidation flush, driven primarily by forced exits and interest-rate concerns. Once the overleveraged positions are cleared, liquidations typically stop. Bitcoin has not yet breached its former range top, providing a ray of hope.
However, if Bitcoin closes below $80,000 for a week while fund outflows persist, it could signal a deeper drop beyond just a leverage flush. In that case, the $76,618 moving average may soon become the next level to watch. If Bitcoin stabilizes above the support zone and fund outflows halt, it would suggest the liquidation wave has cleared excess leverage, allowing the market to recover.
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Sam Daodu is a crypto analyst and the editor of 24/7 Wall St.'s Crypto Desk, where he covers Bitcoin, XRP, Ethereum, Solana and the altcoins investors search for most. His work focuses on price levels, spot ETF flows, on-chain data and the regulatory decisions that move crypto markets, written so a first-time buyer and a seasoned trader can both use it.
Sam has written about crypto professionally since 2019 and has published more than 2,000 articles. Before joining 24/7 Wall St., he wrote for crypto media outlets and Web3 companies and ghostwrote for crypto founders and token launches. His analysis is syndicated on Yahoo Finance, MSN and AOL and has been cited by other crypto news sites. He also founded MacLabs Marketing, a content and personal branding agency for crypto founders and executives.
When he isn't reading charts, Sam is usually at the gym or watching One Piece, a series he maintains has better tokenomics than most altcoins.
