Bitcoin Plunge Wipes $700M in Leverage, Whale Profits Drop 93%

Bitcoin open interest dropped by 8,500 BTC in under 48 hours, representing a $700 million unwind of leveraged positions at current prices. According to Velo data, Bitcoin-denominated open interest had reached 295,054 BTC on Thursday, surpassing the October 10 level by 5,000 BTC, before the dramatic reversal brought the metric down to 286,461 BTC. This massive position reduction triggered a cascade of liquidations across the crypto market.

The sell-off intensified Friday morning as Bitcoin slipped to an intraday low of $81,868, shedding 2% in under 10 minutes according to CoinGecko data. The rapid decline resulted in nearly $1 billion in liquidations within a single hour, with Bitcoin longs accounting for approximately $500 million of that total. Ethereum and Solana followed with $183 million and $56 million in long liquidations respectively, per Coinglass data.

Maarten Regterschot, a verified analyst at CryptoQuant, told Decrypt that ‘this is the first major flush since October 10,’ while emphasizing a crucial distinction: ‘While the historic liquidation event on October 10 was driven by spot selling, the current drop is leverage-driven.’ This distinction highlights how excessive borrowing amplified the market’s downward momentum.

The leverage-driven selloff inflicted devastating losses on major market participants. One crypto whale saw profits collapse by 93%, dropping from $63 million on November 10 to just $4 million as of Friday. The same trader remains exposed to $37 million in unrealized losses on Ethereum and Bitcoin long positions, illustrating the severe impact of the downturn on even the largest market players.

In a similar pattern, Jeff ‘Machi big brother’ Huang’s profits tanked from $44.8 million on September 18 to negative $20 million, with nearly $650,000 in losses accumulating over 24 hours. These dramatic reversals demonstrate how quickly leveraged positions can turn against even experienced traders in volatile market conditions.

The contagion spread across the entire crypto ecosystem, with the top 10 cryptocurrencies by market cap (excluding stablecoins) showing double-digit declines over 24 hours. This broad-based selling pressure pushed the total crypto market cap below $3 trillion for the first time in seven months, marking a significant psychological threshold for market participants.

Market sentiment indicators reflect the prevailing pessimism. The Crypto Fear and Greed Index remains stuck at ‘Extreme Fear,’ while on prediction market Myriad’s perpetual sentiment market, Fear hovers around 49.7%. This persistent negative sentiment contrasts with the relative stability of traditional markets, where the S&P 500 index showed signs of stabilization after Thursday’s dip, suggesting the decline was localized to cryptocurrencies.

Derek Lim, head of research at Caladan, told Decrypt that ‘we are in a very tricky situation in the short term.’ He explained that current market activity isn’t aligning with key economic factors, highlighting significant catalysts that could boost market liquidity including the end of quantitative easing, the resumption of U.S. government spending, and potential stimulus packages.

However, Lim noted that these developments will take time to fully influence the market, creating a situation where ‘the market has yet to catch up to what are seen as strong economic fundamentals.’ This disconnect between market sentiment and underlying economic conditions creates uncertainty about when the current downturn might reverse, leaving traders navigating between leveraged positions and broader macroeconomic trends.