Massive Liquidations Shake the Market
Bitcoin dropped less than 4% on Monday but caused one of 2025’s largest liquidation events. Over $1.65 billion in long positions and $145 million in shorts were wiped out. Such liquidations ripple across exchanges, signaling leveraged positions remain dangerously high in the current environment.
Analysts argue this capitulation highlights fragility, not strength, despite relatively muted price declines. The wipeout reminded traders that even small price dips can trigger outsized moves when leverage dominates market structure.
Options Traders Lean Bearish After Crash
Following the sell-off, options activity revealed a strong pivot toward downside protection. Traders significantly increased put-buying, suggesting expectations of further losses this month. Market participants appear cautious, preferring to hedge rather than attempt risky long entries.
The prevailing mood underscores uncertainty surrounding near-term catalysts after the Federal Reserve’s latest move. This sentiment reflects a broader trend where risk appetite contracts quickly after high-profile macro events.
Implied Volatility Surprisingly Stays Muted
Despite the massive unwinding of leverage, implied volatility showed little movement. GreeksLive researcher Adam Chu noted that expectations of future volatility remain relatively calm. This is unusual considering the scale of liquidations that just unfolded across the market.
The muted response suggests participants see the event as corrective rather than trend-defining. Traders appear to believe current conditions won’t spark the same runaway volatility seen in prior downturns.
Put-Call Delta Skew Points to Downside
Bitwise Europe’s Max Shannon highlighted the uptick in 1-week and 1-month put-call delta skew. This metric measures demand for puts versus calls, with higher readings implying bearish sentiment. Current levels have reached their highest since early August, reinforcing caution among traders.
Analysts say this skew reflects defensive positioning amid “sell-the-news” market psychology. Such hedging behavior shows investors are prioritizing capital preservation over speculative gains.
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Fed Cut Sparks “Sell-the-News” Pressure
The Federal Reserve’s quarter-point rate cut initially boosted optimism but failed to ignite a lasting rally. Instead, Bitcoin and Ethereum slipped into negative territory compared to traditional assets. Gold surged over 12% and the S&P 500 gained nearly 4% in the same period.
The divergence reveals crypto’s current weakness against broader macro tailwinds. It also underscores how fragile confidence remains when expectations outpace tangible results.
Longer-Term Optimism Still Intact
Despite short-term fear, experts maintain a bullish stance for the fourth quarter. Chu emphasized that long-dated positioning began shifting bullish as early as last month. Traders remain confident that prices will trend higher over the next three to six months.
Such optimism reflects expectations of stronger institutional inflows and regulatory clarity by year’s end. Many analysts see current dips as consolidation rather than reversal in the ongoing bull market.
Ethereum May Outperform in Recovery
Derive’s Sean Dawson expects Ethereum to recover more strongly than Bitcoin in the coming months. Market makers are net short gamma, meaning they may need to buy spot ETH if prices rise. This structural setup could amplify Ethereum’s upward momentum once the market stabilizes.
Analysts suggest investors monitor ETH closely as a leading recovery signal. If demand accelerates, Ethereum could spearhead the next leg higher for the entire altcoin sector.
