Yesterday, another major liquidation occurred in the crypto markets.
In the first 15 minutes following the start of Jerome Powell‘s press conference, 300 million dollars were liquidated.
A second one then occurred as well, last night, with 150 million dollars liquidated.
Leveraged positions
In these cases, it is a matter of forced liquidations.
The fact is that in the crypto markets there are many speculators who open leveraged long or short positions.
A long position is a bull position that bets on the price increase, while conversely, a short position is a bear position that bets on a price decrease.
These positions, if desired, can also be opened with leverage, meaning borrowing money to amplify the size of the position well beyond the amount of capital actually invested in it.
However, since the borrowed money must be fully repaid, to prevent the speculator from ultimately being unable or unwilling to settle their debts, when any accumulated losses threaten to make the immediate repayment of the loan impossible, the position is forcibly closed by the platform, in order to recover at least the borrowed capital and return it to the lender.
In these cases, the capital invested by the speculator is lost, but not the borrowed one, which instead is fully and immediately returned to the lender with the forced closure of the position.
The causes of liquidations in the crypto market
To trigger the forced liquidation mechanism just described are price movements opposite to the direction in which the position is set.
In other words, if the position is bullish, it is downward price movements that may trigger the forced liquidation. Conversely, if the position is bearish, it is price increases that trigger it.
Note that not all liquidations trigger at the same time. In fact, depending on the leverage (x2, x10, x50, etc.), and when the position was opened (i.e., at what price), there can be different price levels that trigger the liquidation.
Furthermore, not only do the forced liquidations of the different leveraged positions trigger at different times, if they trigger, but they even self-reinforce.
In fact, when a forced liquidation of a long position is triggered, the asset on which it was opened is sold immediately and at market price. This further drives the price down, and often this decline triggers other forced liquidations of other long positions.
It is a kind of chain reaction that only ends when there are no more long positions that need to be liquidated.
Obviously, not all long positions are liquidated when a chain reaction of long position liquidations occurs, but the short ones remain untouched. In fact, in such a case, those who have opened a short position can easily close it in profit.
The same thing obviously also applies to short positions, but in reverse (i.e., with forced purchases that drive the price up).
The causes of yesterday
Yesterday, the words spoken at the press conference by Fed Chairman Jerome Powell triggered the chain reaction of forced liquidations of long positions.
Powell indeed said that it is not at all certain that the U.S. central bank will cut rates again in December, following yesterday’s cut.
In fact, within a few minutes, the probabilities of a 25 basis point cut in December dropped from 85% to 65%, and this effectively forced speculators to reassess their positions.
In a relatively short time, speculators have repositioned themselves, and for example, the Dollar Index has jumped from 98.8 points to 99.3.
It may seem like a minor increase, but for an index like this, it is actually a decidedly significant movement.
This repositioning involved a sale of Bitcoin which caused the price to drop and triggered cascading forced liquidations in the crypto market.
Today’s Case
Today, a similar thing occurred, albeit to a much lesser extent.
What triggered the repositioning was the meeting between US President Donald Trump and Chinese President Xi Jinping.
However, while yesterday’s liquidations ultimately brought the price of BTC from $110,000 to $109,000, with a subsequent recovery, today’s brought it down to $108,000, but with a subsequent recovery.
In other words, in both cases, the price of Bitcoin eventually returned to where it started before the cascading forced liquidations began.
The actual significant drop had indeed occurred yesterday afternoon before the Fed announced the rate cut, when it fell from $113,500 to $111,000.
Source: https://en.cryptonomist.ch/2025/10/30/another-major-crypto-liquidation-yesterday-millions-wiped-out-in-a-few-hours/
