Crypto Markets Pull Back Despite Record Liquidity—Is This the Bubble’s Last Gasp?
Crypto's bull run hits a speed bump as markets retreat—even with liquidity flooding the system. Are traders finally waking up to the froth?
Liquidity at all-time highs, but momentum stutters
Record capital inflows can't mask the cracks forming in crypto's latest rally. Bitcoin and altcoins are bleeding out despite what should be rocket fuel for prices. Either this is a healthy correction... or the smart money's already left the party.
The great deleveraging begins?
Margin calls are stacking up faster than DeFi promises. Open interest is collapsing across derivatives markets—suggesting that leverage, not conviction, was propping up prices. Remember kids: liquidity cuts both ways.
Closing thought: Maybe those 'stablecoin yields' weren't so stable after all. (Wall Street's quants could've told you that—for a 2% management fee.)
Altcoin leverage
Caladan’s Lim pointed to a “huge amount of Leveraged longs, especially in altcoins,” as the major contributor to the ongoing selling. The expert said XRP’s single-day “$89 million long liquidation” was a clear example of “forced selling” accelerating.
“Even with loose liquidity, risk sentiment is cooling,” Lim said, adding that traders “are likely waiting for clarity before putting their money back to work.”
Bitcoin’s 3% slide since Thursday’s peak has caused major altcoins such as Ethereum, Solana, and XRP to shed 4.8%, 6.2% and 7.1%, respectively, CoinGecko data shows.
Ethereum faces a “$260 million in ask-side supply,” or the total volume of sell orders available at various prices on exchanges, that needs to be cleared for a clean break above $4,000, says Liu.
The uptrend could slow down as “profit-taking continues,” he added.
Solana, on the other hand, is more “fragile” with increased risk of liquidation as “leverage is currently outpacing spot demand.”
Despite the warning signs, Lim said it “looks more like a healthy correction, with no evidence of a cycle-ending breakdown yet.”
Echoing that sentiment, Liu suggests the current market decline amid the record surge in U.S. liquidity could be ephemeral.
“We’ve just come off a massive price rally, and the market needs time to consolidate,” he explained. “Expect short-term volatility across the board, but the long-term thesis remains intact.”
