Four months of 50% drawdown! Leveraged liquidations intensify the crisis of confidence in the crypto market

Since mid-January, crypto assets have accelerated their decline. Bitcoin has fallen from its January high of $97,600 to the current $63,100, a drop of 35.3%; compared to the peak of $125,000 in October 2025, it has retraced 47.2%. The total market capitalization of crypto assets has shrunk from $4.3 trillion to $2.5 trillion, evaporating approximately $1.7 trillion.

In the past 24 hours, Bitcoin experienced a maximum retracement of 12%, briefly touching the $60,000 level during Asian morning trading on Friday; over 400,000 traders were liquidated, with a total liquidation volume of $2.3 billion. Currently, the average purchase cost of the US Bitcoin spot ETF is $81,600.

There are two main reasons for the recent continuous sell-off in crypto assets: 1) the ongoing aftermath of the large-scale liquidation turbulence in October last year; 2) multiple popular sectors in the market being overly crowded with bullish trading, leading to a rapid deterioration of market sentiment.

On October 10th last year, Trump’s trade policy reversed again, causing the market to shift from the previous phase of brief global trade easing and risk premium decline that boosted risk asset prices, to a frantic sell-off. Coupled with the fact that US stocks were then in a bubble of overvaluation, market sentiment was tense; as one of the most liquid beta assets globally, crypto assets were hit hardest during this deleveraging cycle. Bitcoin experienced a maximum intraday drop of 14.7%, Ethereum fell 22.7%, over 1.6 million traders were liquidated within 24 hours, with a total liquidation amount of about $19 billion. After this sharp decline, the crypto market fell into a slump with weak recovery.

Since then, spot Bitcoin ETFs have continued to face large-scale redemptions, with these funds experiencing outflows of over $3 billion, $2 billion, and $7 billion in January 2026, December 2025, and November 2025 respectively. This ongoing selling indicates that traditional investors are losing interest, and overall pessimism towards cryptocurrencies is intensifying. Institutional reductions in Bitcoin exposure have led to decreased trading volume, further exacerbating the price decline. Thinner liquidity has made the market more reactive to negative news. Additionally, the concentration of high-leverage positions in futures and perpetual contracts has led to forced liquidations, amplifying the downward price movement.

From mid-November last year to mid-January this year, Bitcoin was in a range-bound oscillation, with the decline mainly driven by crypto asset liquidations. Recently, the selling pressure has been related to broader cross-asset price pressures.