Why is Crypto Down Today? Here’s What Happened

TLDR

• Crypto market lost $166-900 billion in 24 hours with Bitcoin falling below $110,000 and Ethereum dropping 5-8%
• Massive liquidations totaled $818-940 million, mostly from overleveraged long positions in Bitcoin and Ethereum
• Whale sell-offs from dormant wallets and thin weekend liquidity accelerated the price decline
• Risk-off sentiment drove investors to safer assets despite positive signals from Fed Chair Powell
• Bitcoin volatility jumped from 15% to 38% while Ethereum spiked from 41% to 70%

The cryptocurrency market experienced a sharp sell-off on August 26, 2025, with Bitcoin dropping below the critical $110,000 support level for the first time in over a month. The decline wiped between $166 billion and $900 billion from the total crypto market capitalization.

Bitcoin fell 3.2% to trade at $109,826, marking its lowest point in recent months. The drop occurred alongside weakness in traditional markets, with the S&P 500 declining overnight and contributing to broader risk-off sentiment.

Ethereum traders faced the heaviest losses during the correction. The second-largest cryptocurrency by market cap dropped 5-8% from recent highs near $4,700, falling back toward $4,400 levels.

The sell-off triggered massive liquidations across the crypto derivatives market. According to Coinglass data, nearly $900 million in positions were liquidated, with Ethereum accounting for $320 million and Bitcoin contributing $277 million in forced unwinds.

Solana, XRP, and Dogecoin combined for an additional $90 million in liquidations. The majority of these liquidated positions were long bets that became overleveraged during recent price rallies.

Whale Activity Drives Selling Pressure

Large cryptocurrency holders, known as whales, contributed to the market decline through coordinated selling activity. Dormant Bitcoin wallets containing thousands of tokens became active, adding selling pressure to an already fragile market structure.

Weekend trading conditions made the market more vulnerable to large transactions. Reduced liquidity during off-peak hours meant that whale trades had an outsized impact on prices.

Higher Bitcoin exchange reserves during this period created additional downward pressure. The combination of increased supply on exchanges and reduced buying activity accelerated the price decline.

Market volatility surged following the correction. Bitcoin’s daily volatility jumped from 15% to 38%, while Ethereum’s volatility spiked from 41% to 70%, according to Derive.xyz data.

The volatility spread between the two assets suggests traders view Ethereum as more fragile in the current environment. Options markets reflected this defensive positioning, with 25-delta skew turning negative for both major cryptocurrencies.

Corporate Treasury Moves Continue

Despite the market turbulence, corporate Bitcoin adoption continued. B Strategy announced plans to launch a $1 billion corporate BNB treasury and investment vehicle backed by YZi Labs.

Sharps Technology stock surged 96% after unveiling a $400 million plan to build a Solana-based digital asset treasury. The company secured a $50 million SOL token deal with the Solana Foundation through a PIPE transaction.

The total crypto market capitalization now sits at $3.73 trillion, testing a critical support level. Market analysts view this level as pivotal for determining near-term price direction.

Traders are now focused on key technical levels for both major cryptocurrencies. Implied odds for Bitcoin to revisit $100,000 by September end rose to 35% from 20% the previous week.

Ethereum faces a 55% probability of retesting $4,000 levels based on current market pricing. CME data shows record short positions in Ethereum futures, likely tied to hedging strategies.

The market correction occurred despite positive signals from Federal Reserve Chair Jerome Powell at Jackson Hole regarding potential interest rate cuts. However, the risk-off sentiment drove investors toward safer assets regardless of monetary policy expectations.

Market participants are now monitoring upcoming economic data releases, including GDP figures due August 28 and unemployment data in early September, which could influence future price movements.

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