The cryptocurrency market has suffered a severe sell-off, with the total market capitalization slipping back to mid-September levels and marking five consecutive weeks of losses. Nearly $900 billion in market value has been wiped out, according to AMBCrypto.
Liquidations and Market Reaction
According to Coinglass, nearly $1 billion in positions were liquidated on September 5, the largest single-day wipeout since a $2 billion short squeeze in mid-August. Unlike that event, nearly 80% of the liquidations came from longs, indicating that bullish traders were heavily caught offside as the market moved lower.
The sell-off was not confined to crypto. The Nasdaq 100 suffered its largest one-day loss since the pandemic, while the S&P 500 lost $3 trillion in value. This came just 24 hours after the Dow surged 1,600 points following a Democratic sweep in the midterms, pointing to an abrupt change in sentiment post-election.
Trump Comments and Broader Correction
U.S. President Donald Trump took to Truth Social to describe the stock market action as one of the "worst days in history." The crypto wipeout appears to be part of a wider market correction, with post-election volatility adding to selling pressure.
Market fear, uncertainty, and doubt (FUD) seems less about the election itself and more about President Trump. Crypto initially received a strong boost from optimism around his election, but that momentum has faded. Bitcoin is currently down almost 30% from its peak of $126,000, despite progress in regulation with the GENIUS Act, greater tokenization, and increased adoption of stablecoins into traditional finance.
Crypto-Specific Headwinds
Reports that Trump Media sold a total of $343 million worth of Bitcoin have added to concerns about institutional selling and created more FUD around Trump, further weakening the bullish sentiment that initially drove the post-election rally. Additionally, continued outflows from ETFs are adding pressure.
With prices retreating to mid-September levels, crypto could be entering a more severe capitulation phase, as it faces its own market-specific headwinds on top of broader market weakness.
