The cryptocurrency market experienced a sharp correction on Tuesday, declining 2% to approximately $3.9 trillion as itcoin">Bitcoin retreated toward $112,000 and wiped out the week’s previous gains. The selloff was amplified by a massive $1.7 billion in liquidations, primarily affecting long positions in what became the largest liquidation event of the year according to Coinglass data. Major cryptocurrencies felt the pressure across the board, with Ethereum falling 3.3% to $41,197, BNB dropping 4% to $991.3, and Solana sliding 6.2% to $219.03 as leveraged traders were forced to unwind their positions.
The market downturn came despite positive macro developments, including the Federal Reserve’s 25 basis point rate cut and strong institutional inflows into cryptocurrency funds. Spot itcoin">Bitcoin and Ethereum ETFs continued attracting significant capital, with $886.6 million and $556 million in net inflows respectively over the past week. However, momentum began to fade following announcements from the defunct FTX exchange about returning $1.6 billion to creditors starting September 30th, while social media sentiment turned increasingly bearish as more traders began betting against itcoin">Bitcoin’s price according to Santiment analytics.
Market analysts and industry executives largely characterized the selloff as a healthy leverage reset rather than a fundamental breakdown. Maja Vujinovic from FG Nexus explained that the liquidations reflected “excess leverage, not failing fundamentals,” noting that overheated funding rates post-Fed decision left traders vulnerable to forced unwinding. Doug Colkitt from Fogo described the event as crypto’s version of a “margin call avalanche,” emphasizing that such leverage flushes, while brutal, are necessary to reset positioning and clear the path for future growth.
Looking ahead, traders are monitoring funding rates, ETF flows, and bankruptcy estate redemptions as key indicators for market direction. Despite the sharp correction, itcoin">Bitcoin’s relative resilience compared to altcoins has reinforced its position as the market leader, with many analysts expecting a potential rebound as leverage resets and institutional demand remains intact. The consensus among market participants is that this liquidation event may have cleared out weak hands and excessive leverage, potentially setting up healthier market conditions for October.
