Bitcoin's Sudden Drop Sparks Record Liquidation in Crypto Derivatives, Ethereum (ETH) Bears the Brunt

Bitcoin's (BTC) dramatic price decline has sent shockwaves through the cryptocurrency derivatives market, culminating in a record-breaking liquidation in Ethereum (ETH) positions. Hyperliquid, a prominent crypto exchange, disclosed a single liquidation event worth $20.42 million (approximately KRW 29 billion), marking the largest seen in the past 24 hours. Analysts have cautioned that the market is experiencing a significant leverage adjustment phase, urging investors to exercise greater vigilance and adopt cautious portfolio management strategies.

Crypto Market Sees $25.24 Million Liquidated in an Hour, With Long Positions Hit Hardest

According to Coinglass data from the 17th, a staggering $25.24 million worth of liquidations was recorded within a single hour. Long positions accounted for $13.4 million of the total, while $11.84 million came from short positions. This reflects a greater impact on bullish traders who anticipated market rebounds during a broader bearish downturn.

Ethereum emerged as the most severely affected asset during this period. ETH-related liquidations alone accounted for $10.74 million in the last hour. Over a 24-hour span, liquidations of ETH long positions totaled $52.18 million, while short liquidations reached $36.09 million, culminating in a combined $88 million. The largest single liquidation event—totaling $20.42 million—occurred on the Hyperliquid exchange in an ETH/USD trade, setting a new record for a single transaction in this highly volatile market.

Hyperliquid Data Highlights Declining Open Interest in Ethereum and Solana

Metrics from the Hyperliquid exchange emphasize the heightened volatility in the derivatives space. Over the past 24 hours, the trading volume for the ETH/USD pair surged by 41.15%, reaching $3.88 billion. Simultaneously, open interest fell by 4.4%, indicating a wave of liquidations and mass position closures.

Other major cryptocurrencies, such as Solana (SOL), also faced significant pressure. SOL experienced a 5.48% price decline, with $21.1 million worth of positions liquidated. Its open interest dropped by 6.5% during the same period, further illustrating the growing cautiousness among traders.

Sentiment metrics, such as the long-to-short ratios, provide additional insights into market behavior. Ethereum's long-to-short ratio fell to 0.8255, while Solana's landed at 0.9220—both signaling a clear bearish shift as traders hedge against further downside risks. Similarly, other popular altcoins, including XRP and HYPE, saw their long-to-short ratios dip below 0.9, reflecting a rise in short positions amid these turbulent market conditions.

Derivatives Market Indicates Broad Leverage Unwinding

The broader derivatives market painted a concerning picture with 24-hour liquidations totaling $1.1 billion. Long positions dominated these liquidations, accounting for an astonishing 76% of the total. This trend underscores the continued forced unwinding of leveraged buy positions, showing that optimism among traders has waned significantly.

The ratio of open interest to 24-hour trading volume (OI/24h Vol) revealed further warning signs. Ethereum’s OI/24h Vol dropped by 32.27%, Bitcoin declined by 13.63%, and HYPE plunged a dramatic 45.08%. These sharp declines in open interest ratios underscore an accelerated leverage unwinding process across multiple assets, further compounding market instability.

Market experts are sounding alarms over the current wave of forced liquidations in the face of consistent downtrends. Analysts observed, “The market is undergoing a significant deleveraging event. Rather than signaling a rebound, the current trend showcases widespread closures of positions and outflows of capital.” This shift away from speculative leverage marks a clear indication of the market's cautious state, highlighting an amplified focus on reducing positions rather than chasing speculative gains.

Elevated Caution Pervades the Crypto Space

As the derivatives market serves as a key barometer for investor sentiment and overall risk appetite, recent developments indicate a growing trend toward risk reduction and leverage unwinding. Ethereum, Bitcoin, and other key assets have been swept up in heightened volatility, urging market participants to adopt more prudential trading practices.

With leverage reduction becoming the prevailing norm, volatility persists, presenting both risks and opportunities for traders. Until market conditions stabilize, experts urge investors to remain cautious, carefully evaluate their risk exposure, and prioritize capital preservation. The crypto market, while full of promise, remains a landscape demanding measured and informed decision-making.