Crypto Market Wipes Out $1 Trillion Since October: Analyzing The Forces Behind The Crash
Overview
The crypto market has experienced a significant downturn since October 6, resulting in a loss of over $1.1 trillion in value. Analysts from The Bull Theory have identified several key factors contributing to this decline, which has occurred during what was anticipated to be a bullish fourth quarter for the industry.
Market Liquidity Stumbles Post-October 10 Sell-Off
One of the main issues contributing to the market’s poor performance is the severe damage to market liquidity following a dramatic sell-off on October 10. This event resulted in over $20 billion being liquidated from traders within a short time frame. Altcoins were particularly affected, with many witnessing losses of 70% to 80%. The decline in liquidity has led to a market environment where prices can fluctuate easily, meaning that even minor sell-offs can trigger rapid price drops.
The analysts noted that liquidity has not recovered since the initial sell-off, resulting in increasingly sparse order books for major cryptocurrencies. This thin liquidity has stark consequences; even small volumes of selling can lead to significant downward price movements. Recent market activity has demonstrated that price declines appear more pronounced than the actual selling volume.
Another factor contributing to the downturn is the behavior of major market makers. Market analyst Tom Lee suggested that the ongoing correction may be a result of one or two large entities facing considerable losses. Additionally, the presence of excessive leverage in the market has exacerbated the situation. Despite unprecedented liquidations, many traders have reportedly returned to the market with increased leverage. This high leverage, combined with thin markets, allows market makers to trigger substantial liquidations with minimal price movement, resulting in aggressive sell-offs.
Crypto Fear Index Hits Lowest Level In Over 3 Years
Market sentiment has also been negatively impacted by fear, uncertainty, and doubt (FUD). Current narratives, such as speculation surrounding Strategy potentially facing forced liquidations if Bitcoin falls below a certain threshold, have contributed to a climate of panic. The Fear Index has dropped to a level not seen in over three and a half years, indicating extreme fear among market participants. Analysts believe that such levels of fear suggest two possible scenarios: either the market has reached its bottom, or it is close to doing so.
In addition to sentiment measures, the Relative Strength Index (RSI) for Bitcoin has returned to levels comparable to those seen in January 2023 when Bitcoin was valued around $20,000. This suggests a stretched market on the downside, particularly within altcoins, where speculative activity has diminished and retail interest is waning.
Despite the turmoil in the market, analysts from The Bull Theory assert that fundamentally, little has changed within the crypto landscape. They pointed out that Bitcoin’s network remains robust, marked by an increasing hashrate, ongoing institutional interest, and a supportive stance from the US government regarding regulated crypto. However, the future direction of the digital asset market remains uncertain, as both negative and bullish cycles do not follow straight lines.
Impact on the crypto market
- The crypto market has lost over $1.1 trillion in value since October 6.
- Market liquidity has significantly declined, leading to increased price volatility.
- Altcoins have suffered substantial losses, with some seeing declines of 70% to 80%.
- The Fear Index has hit its lowest level in over three years, indicating extreme market fear.
- Excessive leverage among traders has contributed to aggressive sell-offs in a thin market.
- Despite the downturn, Bitcoin’s fundamental network health remains strong, with ongoing institutional interest.
Updated: 11/18/2025, 6:35:12 AM
