Understanding Why Crypto Markets Plunged: Liquidation Cascade Triggers Widespread Selloff

The crypto sector experienced a sharp downturn on Monday, with Bitcoin retreating from its earlier $100,000 level to settle around $96,000 by late U.S. trading hours—a concerning 5% decline within 24 hours. This broad-based sell-off wasn’t isolated to the flagship asset. Ether tumbled 10% to $3,590, while major altcoins faced even steeper punishment, with Cardano (ADA), Avalanche (AVAX), and XRP all posting approximately 20% dives throughout the session. What started as a gradual weekend slide accelerated dramatically on Monday evening, leaving the entire digital asset landscape significantly lower by day’s end.

The Liquidation Cascade: $750M in Positions Wiped Out

The brutal move triggered a cascade of forced closures in the leverage derivatives market. According to CoinGlass data, over $750 million worth of leveraged positions were liquidated across all digital assets within a single 24-hour period—a washout magnitude comparable to the August volatility spike and approaching the intensity of the previous week’s dramatic swing from $100,000+ down to $90,000.

The overwhelming majority of these liquidations stemmed from long positions, indicating that bullish traders were caught off-guard by the sudden repricing. This mechanical element—forced selling from margin calls—likely exacerbated the price decline beyond what pure sentiment would have driven.

Why Crypto Is Down: Momentum Shifts and Profit-Taking

Analytics firm 10x Research identified several warning signals in Monday’s markets. Exchange trading volumes have been declining, while long-term holders have been aggressively taking profits—textbook indicators of waning momentum that typically precede consolidation phases.

According to Markus Thielen, 10x Research founder, “This is likely to be only a brief consolidation phase before the bull market regains momentum. However, traders should now pay close attention to which positions are outperforming and which are underperforming, as the rally enters a phase where not everything will continue to rise.”

This perspective suggests the downturn reflects natural market maturation rather than a fundamental reversal. Thielen’s warning about selective strength—the idea that the “everything up” phase is ending—carries important implications for portfolio positioning.

Market Positioning: Sideways Until Year-End

Digital asset hedge fund QCP offered additional color on trader sentiment. Options market positioning reveals that sophisticated traders are increasingly hedging for sideways price action through the end of the holiday season, with many rolling their bullish bets into early next year.

“Although we’re still structurally bullish, spot price is likely to range here for the remainder of the holiday season,” QCP noted in their Monday analysis. This stance reflects confidence in the longer-term bull market thesis while acknowledging near-term uncertainty.

The Technical Bounce: Relief or Trap?

After the heavy selling, Bitcoin surged back to $69,000 in what appeared to be a sharp short squeeze, dragging altcoins like Solana (SOL), DOGE, and Cardano higher alongside crypto-linked equities from Circle, Coinbase, and others. However, not all analysts view this rebound as healthy.

LMAX Group’s Joel Kruger cautioned that the bounce appears to be primarily a technical phenomenon—driven by the unwinding of bearish positioning and thin market liquidity rather than by clear fundamental catalysts. “Traders should exercise caution about its durability,” Kruger urged.

FalconX’s Joshua Lim confirmed that some funds are indeed chasing the rally, rotating into volatile altcoins and options positions. However, sustainable strength in crypto remains contingent on breakthrough levels. Key resistance sits around $72,000 and $78,000 for Bitcoin—levels that must be broken decisively on a sustained basis to signal a genuine structural uptrend rather than a temporary relief bounce.

The Bottom Line: Consolidation or Correction?

The Monday selloff illustrates the tension between structural bullishness (longer-term bull market intact) and tactical caution (near-term volatility elevated). For traders, the key takeaway is that crypto is down primarily due to profit-taking by long-term holders, mechanical liquidations, and reduced trading momentum—not fundamental deterioration. How the market handles key technical levels in coming sessions will likely determine whether this episode marks a healthy consolidation or the beginning of something more sustained.