The crypto markets were rattled overnight as Bitcoin took a sudden nosedive below the psychological $100,000 level, triggering a cascading wave of long liquidations that topped $700 million. The dramatic move caught bulls off guard, slamming major altcoins like XRP and Dogecoin particularly hard and casting doubt on the sustainability of the current rally.
Bitcoin’s Sharp Reversal Sparks Liquidation Cascade
After flirting with new all-time highs earlier in the week, Bitcoin abruptly reversed course late Wednesday, plummeting from near $105,000 to under $98,000 in a matter of hours. The sharp sell-off triggered a staggering $700 million worth of long liquidations across major exchanges, as over-leveraged bulls were forcibly ejected from their positions.
While liquidations are not uncommon in the volatile crypto markets, the sheer scale and speed of this wipeout was notable. It marked the highest single-day liquidation total since the market meltdown in late 2023. The fact that it was almost entirely concentrated in longs also raised eyebrows.
Altcoins Slammed as Speculators Get Burned
As is often the case, Bitcoin’s abrupt move had an outsized impact on the altcoin markets, with several major coins posting steep losses. Ripple’s XRP and meme favorite Dogecoin were among the hardest hit, shedding over 5% each and accounting for an unusually high proportion of total liquidations.
The severity of the altcoin plunge compared to Bitcoin suggested that much of the speculative fervor and leveraged trading has migrated to smaller coins in search of higher returns. This “risk-on” behavior can amplify gains during rallies, but leaves traders exposed to sharper drawdowns when the tide turns.
XRP and DOGE futures recorded an unusually high $70 million in liquidations, indicative of rising speculative activity in majors.
Powell’s Comments Shake Confidence in Bitcoin Reserve
Perhaps adding fuel to the bearish fire were comments from Federal Reserve Chair Jerome Powell, who seemed to pour cold water on President-elect Donald Trump’s promises to keep all government-held Bitcoin as a strategic reserve.
In a post-FOMC press conference, Powell asserted that under current regulations, the Fed was not permitted to own Bitcoin outright, and that any changes would need to come from Congress. This appeared to be a rebuke to Trump’s campaign proposal, which many saw as a potential bullish catalyst going into 2025.
“That’s the kind of thing that Congress should consider, but we are not looking for a law change,” Powell said.
A Local Top or Just a Bump in the Road?
The big question on traders’ minds now is whether this sharp correction marks a significant local top for the recent rally or just a temporary speedbump on the road to new highs. Bulls will point to the still-strong fundamental backdrop of increasing institutional adoption and the looming halving event as reasons to remain optimistic.
However, the heavy liquidations and Powell’s comments may have dealt a blow to short-term sentiment. If leveraged longs become gun-shy and momentum begins to fade, the path of least resistance could quickly turn south.
At the very least, this episode serves as a stark reminder of the ever-present volatility in the crypto markets, and the dangers of excessive leverage. Whether a healthy retracement or the start of something more sinister, traders would be wise to manage risk carefully in the coming sessions.
- Bitcoin’s drop below $100k sparked a $700M liquidation wave
- Altcoins like XRP and Dogecoin were hit even harder than Bitcoin
- Fed chair Powell’s comments clash with Trump’s Bitcoin reserve plans
- Traders questioning if this is a major top or just a bull market pullback
