The cryptocurrency market is "bleeding profusely," with Monday's sharp decline being "the largest scale liquidation this year."

On Monday, the cryptocurrency market experienced a sharp sell-off, leading to the largest liquidation event of leveraged long positions this year.

According to data provider CoinGlass, over 370,000 traders had their positions liquidated in the past 24 hours, totaling up to $1.8 billion. This wave of selling caused the total market capitalization of cryptocurrencies to evaporate by more than $150 billion, dropping to a two-week low of $3.95 trillion.

The market impact was immediate. Bitcoin's price on Coinbase briefly fell below $112,000, while Ethereum dropped below $4,150, marking the most significant market correction since mid-August. Among them, long positions betting on the rise of Ethereum and Bitcoin were the hardest hit, with other altcoins also suffering significant losses. As of the time of writing, Bitcoin has risen to $113,155.

Although major crypto assets found temporary support after the plunge, and market sentiment stabilized slightly, analysts warn that based on historical market corrections in September, more volatility may occur in the future.

Leverage Trading is the "Main Culprit"

Analysts generally attribute this market flash crash to traders' excessive leverage behavior. Raoul Pal, founder of Real Vision, pointed out that this situation is common in the crypto market, summarizing:

“Before a major breakthrough is expected, traders heavily leverage long positions, but the first attempt often fails, leading to mass liquidations... Only after this does the real breakthrough occur, by which time most people have already exited.”

CoinGlass data confirms that this is the largest long liquidation event of the year. Similar liquidation scenarios occurred multiple times in late February, early April, and early August this year, when the spot market evaporated hundreds of billions of dollars in a very short time. The commonality among these events is that excessive leverage amplified market volatility, leading to a chain reaction of forced liquidations.

Some viewpoints suggest that the severity of this liquidation is closely related to the imbalance of leverage in altcoins (especially Ethereum). Researcher "Bull Theory" pointed out that the leverage ratio in the altcoin market has become "excessively imbalanced" compared to Bitcoin. Data shows that the liquidation amount for Ethereum long positions exceeded $500 million, more than double that of Bitcoin.

“When the leverage ratio of altcoins reaches such extreme levels, the market cannot ignore it,” the researcher stated:

“A sharp decline will trigger chain liquidations. This is how the market cleans out weak hands and resets the game.”

Technical Correction or End of the Bull Market?

Regarding the future direction of the market, analysts' opinions are divided, but most tend to characterize it as a technical adjustment rather than the end of a bull market. Nassar Achkar, Chief Strategy Officer of CoinW Exchange, stated that this washout "may be a short-term adjustment rather than a long-term structural shift in the bull market, as the future path of easing policies remains favorable for risk assets like Bitcoin."

IG market analyst Tony Sycamore also expressed a similar view in an interview with Cointelegraph. He believes that Bitcoin's recent decoupling from tech stocks or gold "is largely due to technical factors," and the market needs time to correct the massive gains of the past 12 months and digest overbought readings. He added:

"Technically, a pullback to the support zone of $105,000 to $100,000 is reasonable, which includes the 200-day moving average at $103,700. This will wash out some weak-handed speculators, and I think it also provides a good buying opportunity for the year-end rally."

Despite the sharp decline this week, Bitcoin's current pullback from its historical high is only 9.5%, which is still relatively shallow compared to the deep pullbacks seen in previous bull market years.

Historically, September is usually a weak month for the crypto market. In the past 13 years, Bitcoin has seen declines in 8 of those Septembers. However, despite this significant drop, Bitcoin is still up about 4% so far this month.

Traders are now hoping for a repeat of historical patterns. In stark contrast to the "September curse," October is widely referred to as "Uptober" in the crypto community, typically a month of strong market performance