What’s next after crypto’s largest long liquidation event since February?

Bitcoin’s relatively calm September streak snapped this week with a sharp Monday sell-off that erased $285 million in long positions and triggered $1.6 billion in liquidations across the broader crypto market. The wipeout marked the fourth-largest bitcoin liquidation event of 2025 and the heaviest single-day clearing of leverage across digital assets since February, according to research and brokerage firm K33.

While liquidation data is imperfect — with Bybit publishing in full, but Binance and OKX still underreporting in incomplete bursts, for example — the surge still points to an intense flush of leverage after weeks of dormant volatility, Head of Research Vetle Lunde noted in a new report. Seven-day realized volatility in BTC had sunk to just 0.6% last week — the lowest since August 2023 — creating conditions ripe for a sudden dislocation once positions tilted too far one way, he said.

Bitcoin perps’ daily liquidation volume. Image: K33.

The question now is whether the deleveraging sets a floor or foreshadows more sluggish trade, with history leaning toward underperformance. The report noted that, on average, bitcoin has returned just 0.78% over the 30 days following the top 5% annual liquidation events — well below the typical average 5.9% 30-day return. Median performance is even worse, at –1.1%, underscoring a tendency toward weak or negative follow-through.

That said, outcomes vary. Roughly a quarter of prior liquidation spikes coincided with local bottoms, with BTC climbing 7.4% over the following month on average. However, the worst quartile saw 6% declines over the same period. “In other words, some large liquidations tend to coincide with local market bottoms, but most coincide with a period of sluggish BTC performance, with BTC underperforming relative to its normal trajectory,” Lunde said.

Average cumulative 30-day returns in BTC vs. cumulative BTC returns post large liquidation. Image: K33.

With perpetual open interest still hovering near yearly highs at around 305,000 BTC and funding rates briefly flipping negative into the sell-off, leverage remains thick in the system, leading K33 to maintain a cautious near-term outlook.

The broader derivatives picture reflects the same defensiveness, Lunde pointed out. CME futures activity remains muted, with September contracts briefly trading below spot at points — a sign of stress not seen since June, the analyst wrote. Meanwhile, leveraged ETF flows flipped negative, with VolatilityShares posting its largest outflow in over a month.

Altcoin leverage broadening

If BTC’s liquidation flush was dramatic, altcoins were hit harder. ETH perps saw nearly $490 million in longs liquidated — almost double bitcoin’s tally — with leverage migrating away from BTC throughout 2025. Bitcoin perps averaged 47% of open interest in 2024 compared to just 40% in 2025, plunging to record lows of 32.7% last week, K33 noted.

That rotation stems from multiple drivers: bitcoin’s falling market cap dominance (down from 66% in June to 58.6% now), strong momentum in ETH and SOL following treasury-company launches, and anticipation of mid-October ETF debuts for SOL, XRP, DOGE, and LTC, Lunde said. Local market peaks have consistently aligned with these alt leverage spikes this year, as traders reach further out on the risk curve while BTC volatility remains subdued, he added.

BTC share of perp OI vs. altcoin perp OI. Image: K33.

The same dynamic is visible on CME. Once almost entirely BTC-dominated, CME’s crypto open interest share for bitcoin has slid from 82.6% in June to 57.9%, as institutional flow spreads into ETH, SOL, and XRP futures and leverage quietly builds.

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