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End of Summer Shakeout


A large institutional seller sparks largest futures liquidations in both BTC and ETH since May 19, 2021. SOL led the way, BTC and ETH held up, while DeFi and altcoins underperformed.

Key Takeaways

  • A large BTC seller dumped on OTC markets into low liquidity during the US morning, causing price to break support

  • Price downturn spread to other spot markets including ETH and the rest of the altcoin market

  • Increased leverage in both BTC and ETH, but particularly ETH where futures open interest had reached ATH, sparked forced liquidations on futures platforms

  • The largest liquidations for BTC and ETH futures positions since May 19, 2021 quickly pushed prices down dramatically, with BTC down 17% and ETH down 27% peak-to-trough

  • Outside of liquidations, flows through Galaxy OTC skewed heavily to buy, with clients opting to buy the dip

  • While no clear news event to spark the selling, some observers pointed to 1) a buy-the-rumor-sell-the-news on El Salvador, 2) a delayed reaction to regulatory moves like the SEC’s announcement of an investigation into Uniswap Labs, 3) profit taking from hedge funds following a melt-up over the long weekend. Our view is that the move was mostly caused by selling and market structure rather than narrative

Bitcoin Selloff


Amidst a broader dip in equities markets, bitcoin shed roughly $7,000 off its price, falling from around $50,000 to $43,000 in 30 minutes beginning around 10:40 AM EDT. The sell-off occurred as buying pressure cooled off with $53,000 acting as resistance. The drop began in spot markets and was exacerbated by futures markets, which saw their biggest liquidations for BTC and ETH futures since May 19, 2021. At its bottom, BTC was down 17% while ETH dropped 27%.

Other Coins Follow

Altcoins and DeFi names followed BTC and ETH lower, with the FTX DeFi Index falling as much as 28% from peak-to-trough (in line with ETH’s drawdown), ultimately recovering to 16% lower at time of writing. Solana notably outperformed, dipping less and recovering faster than other coins and holding mostly flat on the day at the time of writing. After reaching all-time highs of $195.10 during the US morning, SOL slid to 170 during the “crash” and almost instantly recovered to 188, managing to close the day with a 4% gain. BTC and ETH held up as the next two best performing coins, with the rest of the market fairing worse.


Source: TradingView

Futures Markets & Liquidations

Open Interest

Just prior to the event, ETH futures open interest breached the May’21 highs, reaching an all-time-high of $11.1bn in open interest. Meanwhile, Bitcoin futures open interest had crept back up to levels not seen since May, though still remained well below its all-time high of more than $25bn.


Liquidations & Basis

In turn, ETH saw $845mm in futures liquidations (8% of open interest) and the Deribit 1-month annualized spot-futures knee jerked from 10% to as high as 28% just before the move lower, dipping to -2% as spot sold off and ultimately settling at 12% as of writing. BTC basis did not experience the sharp initial jump seen by ETH, rather it traded sideways around 10% prior to dipping to -25% and quickly reversing to 10%. Of the $19bn in BTC futures OI moving into the event, $1bn were liquidated (5% of OI).


Liquidations as % of Spot Volume

In addition to both BTC and ETH seeing the largest day of liquidations since May 19, 2021 in absolute terms, it’s worth noting that low spot volumes added to the carnage. One way to visualize this is to compare liquidations to the total traded spot volume. On Tuesday, BTC liquidations were 34% of total traded spot volume across major exchanges (vs. the 1y daily average of 12%), the largest since April 18 (when liquidations were more than 90% of traded spot volume, a day of extreme volatility and an outlier in the dataset).


ETH liquidations were 23% of total traded spot volume across major exchanges (vs. the 1y daily average of 8%).



Ultimately, both BTC and ETH were in overbought territory after enjoying significant appreciation over the summer. With BTC holding above its 200-day moving average and ETH holding well above $3000, we view the near-term technical structure as unchanged and our outlook positive, particularly with institutional inflows expected to resume now that summer has ended.