Ethereum Plunges Over 10% in Heavy Sell-Off Amid $3 Billion in Mass Liquidations

The price of Ethereum (ETH) experienced a sharp and rapid decline, dropping more than 10% during a major market sell-off. This decline was worsened by a chain of forced liquidations, where nearly $3 billion worth of leveraged crypto positions were automatically closed by exchanges as prices fell.

The main cause was a large unwinding of overleveraged derivatives positions, especially long bets predicting higher prices. As Ethereum's price started to fall, it triggered automatic sell orders from traders using excessive borrowed money (leverage) to boost their bets. This forced selling created a self-perpetuating downward spiral, pushing prices lower and causing even more liquidations in a feedback loop.

The sell-off was not limited to Ethereum; major cryptocurrencies like Bitcoin also recorded significant losses, indicating a widespread market downturn. Analysts cited various factors, including a shift toward risk aversion in traditional financial markets, worries over regulatory moves, and a general cooling of speculative enthusiasm that had driven the previous crypto rally.

The event highlights the extreme volatility and the risks inherent in the cryptocurrency market, particularly in the derivatives and leveraged trading sectors. The scale of liquidations suggests many traders, especially retail investors, were caught with highly leveraged positions that quickly became unsustainable.

Although such sharp corrections are common in crypto markets, the size of this move has sparked debates about market stability and the impact of derivatives trading on spot prices. The rapid decline underscores the importance of risk management for investors in an asset class known for its dramatic price swings.