Crypto Market Hit by Sharp Sell-Off as Long Positions Unwind

The crypto markets have experienced a sudden downturn as investors are retreating from leveraged positions. This has triggered a new wave of liquidation across all major tokens. Since the evening of July 23, the combined market capitalization of the top 20 currencies has dropped to 6.8%, reflecting the consistent market pressure.

While Bitcoin (BTC), the premier cryptocurrency, fell to $117k, altcoins such as Ethereum (ETH) lost 3%, XRP lost 13%, and Solana (SOL) lost 8% of its value. The downturn has been linked to a “long squeeze,” a forced liquidation of long positions, fueled by traders closing leveraged bets amid shrinking market confidence.

Crypto Market Experiences Intense Sell-Off

Data from big crypto exchanges like OKX, Binance, and Bybit showed that traders and investors were far less interested in open interest. Solana’s positions dropped by 5%, XRP’s dropped by 6%, Ethereum’s dropped by 2%, whereas Bitcoin’s positions dropped by 1.5%.

It's important to note that these contractions didn't come with a lot of new short positions, which means that the decline wasn't caused by more bearish sentiment but by traders getting out of risky tactics.

This "long squeeze" process has changed the way prices move in a clear way. Normal downward trends are frequently caused by more short selling, but this correction seemed to be caused by the closing of bullish bets that had gotten too big. This difference is important since it means that the basics of the market are still mostly the same.

Funding rates, which are the fees that traders pay to hold leveraged positions, have stayed positive during the sell-off. This means that even if the price went down, investors still feel good about the market. Positive funding usually means that there is still demand for long positions, even when the market is unstable.

Some experts in the field say that this strong drop could potentially help the market in the long run. By getting rid of too much leverage, the conditions for more stable growth are being prepared. A market that is less speculative and has fewer players is often better set up for recovery and growth.

As things calm down, investors are keeping a close eye on whether the market stays at its current levels or gains new strength. In either scenario, the recent drop may have been a useful stress test that showed how strong crypto markets are when things are volatile inside them.