The aftermath of the $20 billion liquidation remains: the crypto market falls into a "post-liquidation confusion," with alts market capitalization dropping below the low point of the FTX era.

According to Bloomberg, after experiencing a liquidation crisis that involved nearly $20 billion and triggered the largest single-day cleanout in industry history, the crypto assets market is entering a “Post-liquidation limbo.” The crash on October 10 completely wiped out the speculative bubble in risk assets, leaving Bitcoin, alts, and flagship ETFs without a clear path to recovery. Notably, the market capitalization weighted index tracking the 50 smallest tokens has fallen below the lows of the 2022 FTX era, suggesting that speculative capital is accelerating its withdrawal from the forefront of crypto assets.

The liquidation crisis severely impacts risk assets: alts become leading indicators of market weakness

The damage caused by large-scale liquidations to the market structure is clearly visible, especially for altcoins with poor liquidity.

· Retail capital withdrawal signal: These thinly traded, primarily retail-held minimal digital assets serve as early indicators of marginal risk appetite. Their sharp decline (falling below the lows of the FTX era) sends a clear signal: speculative capital is withdrawing from the high-risk crypto assets space.

· Bitcoin struggles to stabilize: Although the price of Bitcoin remains above $100,000, it is still far below the levels seen a few weeks ago. The market has yet to recover from the forced liquidations that occurred in the perpetual futures market on mainstream CEX and other centralized exchanges.

Institutional Sentiment Cools: ETF Fund Outflows and the Sluggish Leverage Market

The clearing crisis has not only impacted the spot market but also significantly cooled the sentiment and leveraged trading activities of institutional investors.

· ETF fund reversal: BlackRock's iShares Bitcoin Trust, with a scale of 88 billion USD, has recorded over 400 million USD in outflows for five consecutive trading days, ending a previous trend of inflows for 10 consecutive days. Its Ethereum counterpart product, ETHA, saw outflows of over 260 million USD within two days. Although relatively small compared to the managed asset scale, the reversal of funds suggests a weakening of retail demand.

· Leverage trading shrinks: perpetual futures - the preferred leverage tool for crypto traders - show no signs of recovery. According to data from K33 Research, the average funding rate over the past week has been negative, indicating that traders are paying fees to hold short positions in Bitcoin. The open interest in the perpetual futures market remains sluggish.

· Defensive stance of the options market: The options market has returned to a position of short-term volatility, indicating that traders expect prices to fluctuate within a range. On the Deribit platform under Coinbase Global Inc., put contracts with a strike price of $100,000 are the most active, reflecting ongoing demand for downside protection.

Structural Weakness Exposed: Waiting for the Decisive Impact of Macroeconomic Data

Analysts believe that this sell-off is less about questioning the intrinsic value of Crypto Assets and more about short-term traders quickly repositioning themselves in response to broader macro volatility.

· Structural weaknesses exposed: Brett Munster, portfolio manager at Blockforce Capital, stated that this sell-off has revealed persistent structural weaknesses within the industry, especially among platforms that rely on opaque and proprietary risk engines.

· Waiting for CPI data: Market focus shifts to the U.S. inflation data (CPI) on Friday (after the publication date of the original text). If the inflation data is higher than expected, it may put pressure on both digital and traditional hedging assets.

· Post-liquidation reaction: K33 Research Director Vetle Lunde summarized: “The prevailing bearish bias and risk appetite have completely reversed since October 10. This is consistent with Bitcoin's typical reaction after massive liquidations, which is: anemic consolidation, low interest, followed by an increase in short interest.”

Conclusion

The clearing event on October 10 had a profound “internal injury” effect on the crypto market, especially on high-risk alts. The current market lacks a clear direction, and the cautious attitude of institutional and retail funds makes it susceptible to external macro events. Against the backdrop of sluggish leveraged trading and investors generally seeking downside protection, the market needs to find a clear recovery path only after macroeconomic uncertainties are eliminated and structural weaknesses are repaired.

Disclaimer: This article is for news information only and does not constitute any investment advice. The crypto market is highly volatile, and investors should make decisions cautiously.