Crypto’s Biggest Crash Ever: Is the Bull Market Over or Just Getting Started?

First, a quick personal note. Apologies for not publishing a blog over the past two weeks. My wife and I just welcomed our baby into the world, and I took some time offline to be fully present with my family. Thank you for all the kind messages. Now, let’s get back to the charts.

In this post, I’ll answer the question many of you are asking:

Is the bull market over, or was this just a brutal reset before the next leg up?

We’ll cover:

• What triggered the largest liquidation in crypto history

• Why Bitcoin fell by $20,000 in a single wick and why altcoins dropped 70% or more

• The real reason this crash happened (hint: leverage and cross-margins)

• What whales are doing right now and whether demand is strong enough to absorb their selling

• Which charts and levels to watch next if we want a Q4 rally

• And finally, what this all means for altcoins and timing your next move

The Largest Liquidation in Crypto History

The crypto market just witnessed a cascade of liquidations unlike anything we’ve seen before.

• COVID crash: ~$1.2B liquidated

• FTX collapse: ~$1.6B

• This crash? Over $19B liquidated, nearly 16 times larger than COVID.

Some believe the true number could be above $100B, as several centralized exchanges experienced API outages and delayed reporting, likely understating the full scale. Either way, the result was clear: Bitcoin dropped $20K in a wick, altcoins collapsed by 70% or more, and millions of dollars in leveraged positions were wiped out in minutes.

But why did it happen?

The Real Reason Behind the Flash Crash: Leverage and Cross-Margining

The core issue behind this crash lies in perpetual futures trading — and more specifically, cross-leveraged positions.

Here’s a simplified example:

• You have a SUI long at $3.20 worth $20K

• You also hold a Bitcoin long at $100K worth $100K

• Both are in profit… until the crash hits

• SUI drops to $1, wiping out most of your $20K position

• Because the trades are cross-margined, your BTC position is used as collateral

• If your total margin falls too low, both trades get liquidated — even though Bitcoin didn’t crash

This is how billions in positions vanished at once. It wasn’t just the price drop that caused the liquidations. It was the leverage structure itself. This cascading effect liquidated thousands of traders, amplified the volatility, and triggered a full-market flush.

We Now Have Two Sources of Selling Pressure

There are currently two main forces adding downward pressure to the crypto market:

1. The whales — wallets holding between 10,000 and 100,000 BTC — started offloading their holdings months before the crash. Their selling activity became especially aggressive around July 13th, when Bitcoin was trading near $119K. These entities are sitting on massive profits, and naturally, they began realizing some gains at key resistance levels.

   

2. The bears, who for over a year have claimed that Bitcoin would need to revisit its previous cycle top at $67K. After the October crash, they became emboldened and are now shorting the market aggressively, targeting levels below $90K.

The key question now is this:

Is there enough demand to absorb this selling and keep the bull market alive?

Accumulation Continues Despite the Drop

So far, the answer appears to be yes.

Wallets holding between 100 and 1,000 BTC have been increasing steadily, even after the crash. These entities are absorbing the selling pressure and continuing to accumulate. This is a strong signal that long-term holders and high-conviction players still believe in the broader uptrend.

It’s important to note that spot traders experienced almost no disruption. It was leveraged traders who were hit the hardest. Many lost their entire positions within seconds. This crash serves as a critical reminder: use leverage with extreme caution. In crypto, a single red candle can wipe out years of gains.

Sentiment Shaken: Risk Rises, Fear Spikes

Unsurprisingly, this historic liquidation spike triggered a wave of fear across the market.

• The Fear & Greed Index dropped sharply

  

• Our flagship Bitcoin Risk Metric surged from 40% to 46% in just a few days

  

While this reaction is normal after such an event, it’s something I’m watching closely. Ideally, I want to see the risk plateau and begin trending downward again. If it keeps rising and breaches the 50% mark, that would signal overheating. In that case, I’ll start reducing exposure and managing risk more aggressively.

What Needs to Happen Next: Watch These Levels Closely

As you know, I monitor thousands of charts across the Lab4Crypto platform. But here’s what I’m focusing on in the short term:

During the flash crash, Bitcoin lost its Bull Market Support Band (the 20-week SMA and 21-week EMA). That band had held as support since April 22, 2025.

Reclaiming it is critical if we want to ignite the explosive Q4 rally that many expect.

What I’m watching:

• Daily close above $110.9K

• Weekly close above $112.9K

These would confirm strength and likely reignite FOMO. Many sidelined traders are waiting for this confirmation to re-enter.

Altcoin Patience: Don’t Jump the Gun

It’s tempting to start accumulating altcoins here, hoping for outsized returns. But history shows that altcoins only run after Bitcoin breaks its all-time high — not before.

Altcoin season starts after:

• Bitcoin reclaims momentum

• Ethereum, Solana, and BNB break their previous highs

If you rotate into low-cap altcoins too early, hoping to front-run the cycle, you risk doing the opposite, taking on insane losses rather than gains.

A Critical Macro Catalyst: End of Quantitative Tightening?

One final piece of the puzzle to watch is macro policy.

Jerome Powell recently signaled that the Federal Reserve may soon end Quantitative Tightening (QT), the process of shrinking the Fed’s balance sheet by allowing assets to mature without reinvestment. This effectively slows the withdrawal of liquidity from the system.

Historically, the end of QT has marked major bottoms for risk assets, including crypto. If it plays out similarly this cycle, it could align with a Bitcoin breakout and potentially mark the beginning of a true altcoin season.

On top of that, we’re approaching two key events that could further ignite market momentum:

• The SEC is expected to approve spot ETFs for major altcoins like Ethereum, which would bring institutional capital into broader crypto exposure.

• The Clarity for Payment Stablecoins Act, which has passed the House, may soon become law — providing much-needed regulatory clarity for stablecoins and DeFi infrastructure in the United States.

These catalysts could act as a tailwind for the market just as technicals are testing key levels. Stay focused, stay updated, and don’t underestimate how quickly sentiment can flip when both macro and crypto-specific factors align.

Final Thoughts

The next few weeks may be the most important of the entire cycle.

We’re at a tipping point where sentiment, technical structure, and macro conditions are all converging. If Bitcoin reclaims its Bull Market Support Band and holds above key levels, the bull run is likely still intact. At the same time, we’re seeing signs of macro easing, a potential end to QT, and key regulatory developments like altcoin ETF approvals and the Clarity Act potentially becoming law in the US.

If these trends align, they could trigger a powerful recovery, not just for Bitcoin, but for the entire crypto market.

Whatever happens, stay disciplined, manage your risk, and make data-driven decisions. If you haven’t already, visit Lab4crypto to access the real-time charts, metrics, and dashboards that help you track these critical shifts before the market reacts.