The cryptocurrency market faced a turbulent start to the week on August 5, with Bitcoin plunging nearly 15% — its steepest weekly decline since the collapse of FTX in 2022. The sharp correction triggered a wave of liquidations across leveraged positions, wiping out more than $778 million in trader value and impacting over 200,000 market participants in just 24 hours.
This sudden downturn reflects growing volatility in digital assets amid shifting macroeconomic sentiment, geopolitical concerns, and shifting investor behavior. As risk-off sentiment spreads across global financial markets, even major cryptocurrencies like Bitcoin and Ethereum are struggling to maintain recent gains.
Bitcoin Plummets to $52,410, Largest Weekly Drop Since 2022
Bitcoin, the flagship digital asset, dropped sharply to a low of $52,410 on August 5 before slightly recovering to trade around $53,706 — representing a 14.68% decline. This marks its worst weekly performance since November 2022, when the FTX exchange imploded, sending shockwaves through the crypto ecosystem.
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The sell-off wasn’t isolated. U.S.-listed crypto-related stocks also suffered heavy losses during overnight trading. CleanSpark tumbled over 20%, while MicroStrategy and Marathon Digital both fell more than 16%. Coinbase and Riot Platforms each lost over 13%, reflecting broader investor caution toward high-beta tech and digital asset exposure.
Ethereum Wipes Out Year-to-Date Gains Amid ETF Outflows
Ethereum, the second-largest cryptocurrency by market cap, experienced even greater volatility. Prices briefly dipped below $2,100, hitting a low of $2,084 — erasing all gains made since February 2025. At the time of writing, ETH was trading near $2,300, struggling to stabilize after the sharp reversal.
Notably, spot Ethereum ETFs — which began trading in the U.S. on July 23 — have seen disappointing inflows. According to SoSoValue data, these funds recorded net outflows on six out of nine trading days since launch, totaling $510 million in capital withdrawals. This contrasts with initial optimism surrounding regulatory approval and institutional adoption.
Similarly, spot Bitcoin ETFs saw over $80 million in net outflows last week alone, signaling weakening short-term investor appetite despite long-term bullish narratives.
Total Crypto Market Cap Falls Below $2 Trillion
The broader crypto market has not been spared. According to CoinMarketCap, total market capitalization fell below $2 trillion, now standing at approximately $1.986 trillion — a single-day drop of 9.4%. Since peaking at $2.77 trillion in March 2025, the sector has lost over 28% of its value, highlighting increased risk aversion among traders and institutions alike.
Massive Liquidations Hit Leveraged Traders
Data from Coinglass reveals that over the past 24 hours, more than 200,000 traders were liquidated across global exchanges, with total losses reaching $778 million. Ethereum positions accounted for $276 million of that figure — exceeding Bitcoin’s $258 million in liquidated value — due to its steeper price decline.
One particularly large liquidation occurred on Huobi between 9:00 and 9:15 AM UTC, where a single “whale” position worth $27 million was wiped out. Such events often trigger cascading sell-offs as automated margin calls force further selling pressure.
Why Did the Market Crash?
Multiple factors contributed to this sudden downturn:
- Global Equity Weakness: Major stock indices declined amid concerns over slowing economic growth and delayed rate cuts.
- Geopolitical Tensions: Escalating conflicts in the Middle East heightened demand for traditional safe-haven assets like gold and U.S. Treasuries.
- Tech Sector Drag: High-growth tech stocks — often correlated with crypto — fell sharply, dragging sentiment lower.
- Leverage Unwinding: Excessive use of margin and futures contracts amplified price swings once key support levels broke.
As noted by analysts, changing market expectations played a critical role. Even though rate cut expectations persist, they failed to boost confidence. Instead, uncertainty around timing and economic resilience intensified risk-off behavior.
Understanding Leverage and Contract Trading Risks
Many of the liquidated positions involved leveraged derivative products such as perpetual futures and margin contracts. These instruments allow traders to amplify gains — but also magnify losses.
For example:
- A trader who goes long (buys) Bitcoin with 10x leverage will double their profit if BTC rises 10%, but lose their entire position if it drops 10%.
- Conversely, someone who shorts (sells) Bitcoin profits when prices fall but faces unlimited risk if the market surges unexpectedly.
While contract trading offers strategic flexibility, it carries significant risk — especially during periods of high volatility. Sudden price gaps or exchange slippage can trigger automatic liquidations before traders have time to react.
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Frequently Asked Questions (FAQ)
Q: What caused the recent Bitcoin crash?
A: The drop was driven by a combination of macroeconomic uncertainty, global equity declines, geopolitical tensions, and widespread unwinding of leveraged positions in crypto derivatives markets.
Q: How many people were liquidated in the recent crash?
A: Over 200,000 traders were liquidated within 24 hours, with total losses exceeding $778 million — one of the largest single-day liquidation events in 2025.
Q: Are Ethereum ETFs performing well after launch?
A: No. Despite regulatory approval, spot Ethereum ETFs have seen net outflows totaling $510 million in their first nine trading days, indicating weak initial demand.
Q: Is this crash similar to previous bear markets?
A: While severe, this correction is shorter-term compared to structural bear markets like 2018 or 2022. There's no major exchange failure or systemic collapse — yet investor sentiment remains fragile.
Q: Can I still invest safely during high volatility?
A: Yes. Long-term investors may view pullbacks as entry opportunities. However, avoiding excessive leverage and diversifying across asset classes helps mitigate downside risk.
Q: What should I do if my position is close to liquidation?
A: Monitor your margin ratio closely. Consider reducing leverage or adding collateral early. Setting stop-loss orders and using risk management tools can help protect capital.
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While the current correction has rattled short-term traders, it also serves as a reminder of crypto’s inherent volatility and the importance of disciplined risk management. For informed investors, market downturns can present strategic opportunities — especially when emotions run high.
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