The cryptocurrency market is experiencing its most brutal stretch in years as Bitcoin tumbled below $107,000 on Tuesday, extending a painful decline that has now trapped traders in what analysts describe as a self-reinforcing cycle of volatility and forced selling.
Bitcoin slipped to its lowest levels since July, testing critical support near $105,000, with the digital asset losing more than 15% from its October highs above $126,000. Ethereum fared worse, breaking below the psychologically important $3,800 level as altcoins across the board suffered even steeper losses.
The selling pressure intensified dramatically following what has become known in crypto circles as Black Friday. Nearly $19 billion in leveraged positions were liquidated on October 11, marking the largest single-day wipeout in cryptocurrency history. To put that devastation in perspective, the March 2020 COVID crash saw only $1.2 billion liquidated, while the FTX collapse in November 2022 wiped out approximately $1.6 billion.
The carnage has continued this week. Data from CoinGlass shows another wave of massive liquidations sweeping the derivatives market, with nearly $230 million in long positions wiped out in a single day following more than $536 million the previous day. Both Bitcoin and Ethereum have each seen over $100 million worth of bullish bets liquidated recently.
What makes this downturn particularly dangerous is the cascading nature of the liquidations. When leveraged traders get forced out, their positions automatically sell into an already declining market, pushing prices lower and triggering even more margin calls. It’s become an ugly feedback loop that feeds on itself.
The total crypto futures open interest has now fallen for three consecutive days, dropping from $167 billion on Monday to below $158 billion. That contraction signals not just deleveraging but also declining market participation, as traders either voluntarily close positions or find themselves forced out amid cascading margin calls. With fewer players left to absorb sharp moves, the market becomes even more vulnerable to violent swings.
Market veterans are drawing on econometric theory to explain what’s happening. Volatility tends to cluster, meaning periods of high volatility are often followed by more of the same, while calm phases breed additional stability. Right now, crypto assets remain locked in a high volatility regime where each wave of liquidation amplifies the next, keeping the market trapped in a dangerous loop.
The altcoin spectrum has been hit particularly hard. Many smaller cryptocurrencies lost between 25% and 70% within mere moments during that October 11 collapse. Dogecoin plunged 19.92%, XRP dropped 12.75%, Cardano sank 18.04%, while meme coin PEPE recorded the steepest fall at 23.84%. For bulls who believed in various cryptocurrency narratives, the losses have been nothing short of devastating.
The immediate trigger for this market chaos came from an unexpected source. On October 10, President Trump announced plans to impose an additional 100% tariff on Chinese goods starting November 1, responding to China’s expansion of export controls on rare earth minerals. The announcement, which came after US markets had closed but while crypto exchanges remained open, sent shockwaves across all risk assets.
Trade tensions between Washington and Beijing had appeared to be cooling over the summer, with both sides engaging in multiple rounds of talks. But the recent flare-up has injected fresh uncertainty into global markets. Trump confirmed this week that trade tensions remain high, telling reporters “you’re in one now” when asked whether the countries are headed for a prolonged trade war.
Adding to the uncertainty, sharp remarks from US Treasury Secretary Scott Bessent directed at China’s top negotiator have injected a personal tone into the standoff, suggesting that a diplomatic resolution remains distant. This lack of clarity in global trade relations continues to unsettle markets, making risk assets like cryptocurrencies particularly vulnerable to further shocks.
Investors and traders appear increasingly frustrated by the unpredictable policy environment and recurring surprises from the Trump administration’s trade strategy. The government shutdown has also delayed key economic data releases, leaving markets to navigate without official indicators just as trade war rhetoric returns to center stage.
Bulls seem increasingly reluctant to step in and absorb risk, fearing further shocks in an environment where volatility and policy unpredictability dominate. The lack of confidence has amplified bearish sentiment, reinforcing the view that current weakness stems not just from fundamentals but also from liquidity pressure and deteriorating market psychology.
Such multi-hundred-million-dollar liquidations have become almost routine in the crypto space, highlighting how vulnerable leveraged traders remain when volatility accelerates. The shrinking open interest adds another layer of weakness, with fewer participants left to stabilize the market’s direction.
Any near-term rebound in Bitcoin may prove temporary, potentially serving as a brief corrective phase within a broader bearish structure characterized by lower highs and lower lows. Until trade tensions ease and volatility subsides, the crypto market faces a treacherous environment where another cascading liquidation event could wipe out billions more in minutes.
For now, the question isn’t whether Bitcoin will recover but rather how much further it might fall before finding a sustainable bottom. With the Trump-Xi meeting still scheduled for late October and trade negotiations continuing, the next few weeks could determine whether crypto can break free from this brutal cycle or faces an even deeper descent.
Source: newsghana.com.gh
