Bitcoin Plunge Triggers $2 Billion Crypto Liquidation Cascade
Sharp sell-off intensified by institutional ETF outflows, pressuring crypto-exposed equities like Marathon Digital and MicroStrategy.
A brutal sell-off rocked the digital asset market this week, as a sharp plunge in Bitcoin’s price triggered a cascade of forced liquidations in the derivatives market totaling over $2 billion and erasing gains for many traders.
Bitcoin, the market's bellwether, fell more than 10% from a recent peak of approximately $92,000 to a low of around $82,605. The sudden downturn was exacerbated by a wave of liquidations, with traders who had used leverage to bet on rising prices seeing their positions automatically closed. Data from market observers showed that in a single 24-hour period, long positions accounted for roughly $1.86 billion of the more than $2 billion in total liquidations.
The initial price weakness appears linked to a significant cooling of institutional sentiment. US-listed spot Bitcoin ETFs, a key driver of the market’s rally earlier this year, experienced their second-largest daily redemption since inception, with a net outflow of $903 million recorded on November 20. This withdrawal followed a period of sustained pressure, with total net outflows reaching $1.9 billion in the preceding week, signaling a decisive reversal from the consistent inflows that had previously buoyed the market.
This turbulence in the digital asset space has spilled over into equity markets, hitting shares of companies whose business models are closely tied to the health of crypto. Crypto-miner Marathon Digital (MARA) saw its shares dip 0.64%, while MicroStrategy (MSTR), known for its large corporate treasury of Bitcoin, fell 2.14% in trading.
The broader crypto ecosystem felt the pressure, with the total market capitalization falling below $2.8 trillion. Coinbase (COIN), the largest US-based cryptocurrency exchange, appeared to buck the immediate trend with a 2.5% gain, though the stock remains sensitive to the sustained downturn in trading volumes and asset prices that often follows such sharp market corrections.
The massive deleveraging event has reset the market landscape, wiping out speculative froth and leaving investors to question whether the correction is a short-term shakeout or the beginning of a more sustained bearish trend. Market participants are now closely watching to see if Bitcoin can establish a new support level or if further institutional outflows will drive prices lower.