Crypto Bloodbath: Chinese Miner Exodus and Hyperliquid Collapse Trigger Market Panic

Digital assets tanked Thursday as twin crises slammed the crypto ecosystem—Chinese mining operations facing regulatory crackdowns initiated mass sell-offs while Hyperliquid's infrastructure failure sparked liquidation cascades.

The Great Firewall's Crypto Consequence

Beijing's latest financial sector purge hit mining operations across Sichuan and Inner Mongolia, forcing operators to dump holdings to cover relocation costs. The sudden supply flood overwhelmed buy-side liquidity.

Infrastructure Implosion

Hyperliquid's trading engine choked during peak volatility, freezing position exits as collateral values evaporated. The platform's 'decentralized' architecture proved anything but when traders needed stability most.

Market makers pulled quotes faster than VC investors exit a sinking project. The whole debacle smells like another case of finance professionals building castles on algorithmic sand—but hey, at least the transaction fees were real.

Crypto prices slipped sharply this week, amid a broad selloff that erased roughly $160 billion in market value, is making a splash in crypto news this week.

Bitcoin (BTC USD) price and ethereum (ETH) price briefly hit two-week lows. On Monday, BTC was around $113,000 and ETH was near $4,100.

Galaxy Digital CEO Mike Novogratz blamed the rout on “big Chinese mining selling” and turmoil in the Hyperliquid exchange token.

He noted that Hyperliquid’s native HYPE token “got hit the hardest” in the selloff. That said, he described the drop as “just a pullback.”

Crypto News: Chinese Miners Selloff Drags Prices

Novogratz said fresh selling by miners in China helped spark the latest downturn. Chinese mining pools still control an outsized share of Bitcoin’s computing power.

Since that’s about 55% of the global hashrate, any large sales can significantly impact the market.

Over the past week, local reports noted that provincial governments ordered new crackdowns on crypto mining, and some operators in Sichuan and Xinjiang have begun divesting assets.

In aggregate, on-chain data and exchange flows showed unusually heavy outflows from addresses associated with Chinese mining operations.

Novogratz told Bloomberg, “…we saw what looked like some big Chinese mining selling,” implying that these sales pressured market liquidity.

Chinese authorities banned crypto mining in 2021, but many miners remain secretly active or have moved equipment overseas.

The dominance of Chinese pools means their moves matter: analysts estimate China still accounts for roughly half of Bitcoin mining output.

If miners sell large holdings to fund relocations or meet capital calls, it can quickly overwhelm demand and depress prices. Novogratz said this selling pressure “hit some of the overall sentiment in the market.”

Crypto News: Hyperliquid Token Turmoil

The other flashpoint making waves in recent crypto news, was Hyperliquid, a fast-growing on-chain perpetual futures platform. Its native token, HYPE, spiked in September and then plummeted as whales and insiders sold.

Novogratz noted that Arthur Hayes – Hyperliquid’s co‑founder – publicly suggested the token “went too far” and hinted that the founders WOULD sell.

Arthur Hayes reportedly exited his entire HYPE stake, even using proceeds as a “deposit on a Ferrari.” This week’s selloff “hit Hyperliquid the hardest,” Novogratz added.

HYPE fell 23% from its late‐week high to around $45 by Tuesday. On-chain monitors show whales dumping HYPE at a loss.

For example, one whale address sold 56,569 HYPE worth $2.67 million on Sept. 23 at an average price of $47.23, realizing a $103,000 loss. The whale had bought in at $49 four weeks earlier.

Chart data shows HYPE trading down roughly 25% from its recent peak, underscoring the volatility.

This collapse weighed on broader sentiment, Novogratz said, but he stressed it was a token‐specific shock:

“I think this is just a pullback.”

Monday’s crash spilled into major cryptocurrencies. bitcoin (BTC USD) slid below $112,000 intraday – a two-week low – before rebounding slightly to about $113,000 by Tuesday morning.

Ethereum (ETH) fell as steeply as 9% on Monday, over $380 drop, and traded near $4,093 by early Wednesday. Other coins also sank; Dogecoin and FLOKI each lost roughly 9%, XRP dropped 4%.

Also, Solana fell 7% on Monday. Overall crypto market cap is now about $3.8 trillion – down from near $3.95 trillion last week.

A surge in forced liquidations amplified the move. Data from derivatives trackers showed roughly $1.5 billion of crypto long positions liquidated on Monday – the biggest one-day blow‐out in months.

Coinglass recorded about $1.7 billion in total liquidations as Bitcoin (BTC USD) and Ether fell through key support levels. This washing out of Leveraged bets helped trigger stop-loss selling across the board.

The imbalance of open interest – with about 64% of Bitcoin positions long – steepened the fall once longs were liquidated.

Novogratz: ‘Just a Pullback’

Bitcoin (BTC USD) slipped slightly in the past day, falling short of breaking above $113,000 and briefly dipping under $111,500.

Ethereum is currently priced at $4,180, slipping 0.60% after rebounding from an intraday low of about $4,070. The token has largely traded sideways in recent sessions and is down nearly 8% over the past week.

In further crypto news updates, most major altcoins also posted losses, though tokens like Aster (ASTER) and Immutable (IMX) bucked the trend with notable gains.

Despite the turmoil, Novogratz struck a cautiously optimistic tone. He said the selloff was a “healthy reset” rather than evidence of a new bear market.

“We are still up significantly on the year,” he noted, reminding that Bitcoin (BTC USD) trades well above its late-2024 lows.

He argued that the current dip was amplified by crowded positioning and short-term news (miner selling, A.I. hype, a record options expiry) rather than any structural failure.

Novogratz also pointed to ongoing institutional inflows – for example, recent stablecoin and ETF flows – as a counterweight to retail losses.

He predicted that U.S. crypto legislation (the GENIUS and CLARITY acts) will “unleash a tremendous amount of new participation” in coming months.

In the meantime, he said investors should view this as a pause:

“Hyperliquid got hit the hardest… I think this is just a pullback.”