Sophia’s Thoughts On Another Shakeout
After weeks of strength, crypto markets were jolted by one of their sharpest sell-offs of the year; a USD 150B shakeout that tested both sentiment and structure.
These are Sophia's Thoughts:
A cascade of liquidations turned routine profit-taking into a full-scale rout, wiping out USD 150B in market cap.
The sell-off was amplified by weakening macro data and fading confidence in rate cuts, colliding with crypto’s cyclical corrections.
Despite the pain, institutional inflows and even political signals point to resilience, framing the drop as a reset rather than a collapse.
🚀 Last week’s market performance
The crypto market fell 3.1% this week, with Bitcoin (BTC) down 2.3% as sentiment softened. Trust Wallet Token (TWT) was the standout, surging 51.5% after receiving backing from a Binance co-founder. On the weaker side, Conflux (CFX) dropped 16.8%, marking the steepest pullback among majors.
🧐 What is your crypto mood today?
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🧂 A USD 150B Shakeout
The cryptocurrency market endured one of its sharpest weekly starts of 2025, erasing more than USD 150 billion market cap between September 20 and 22. Bitcoin slipped over 4%, falling below USD 112,000 mark, while Ethereum tumbled 9% to trade under USD 4,200. Altcoins were hit harder still: Dogecoin and Solana both fell double digits, underscoring just how broad and indiscriminate the sell-off was.
At the center of the storm was leverage. What began as routine profit-taking after weeks of gains quickly snowballed into a liquidation wave. According to CoinGlass, over USD 1.8 billion in long positions were wiped out within just 24 hours, making it one of the year’s largest flush-outs. More than 370,000 traders were forced out of their positions as margin calls rippled across exchanges. In crypto, leverage works like lighter fluid: it fuels rallies when prices rise but magnifies every downturn when momentum shifts.
Yet, for all the drama, the sell-off came against the backdrop of an extended rally that defined much of September. As the chart shows, Bitcoin is still up 4.1% month-to-date, outpacing an equally-weighted portfolio of the top 20 coins at +1.0% and even edging the S&P 500’s +3.1% return. Gold has led traditional hedges with an +8.8% climb, while Ethereum has lagged with a -4.3% drop.
🌀 Macro Meets Market Cycles
The weekend sell-off wasn’t just about crypto traders hitting the sell button, it was amplified by timing. Corrections have always been part of crypto’s rhythm, often following strong rallies, and this episode fits squarely into that pattern. The market’s nature, shaped over years by expansion and reset phases, has made sharp pullbacks almost a feature rather than an anomaly.
At the same time, macro conditions have added fuel to every swing. The Federal Reserve’s September rate cut initially sent digital assets higher. Last week, even President Trump's son, Eric Trump stated “I just think you would potentially see this thing skyrocket,” when discussing rate cut implications on cryptocurrency price action. But, optimism quickly faded as questions mounted about whether easier policy can offset lingering headwinds. Consumer inflation ticked up to 2.9% in August, job growth showed signs of slowing, and wholesale prices unexpectedly dipped. All these factors reinforced the sense that the economy is slowing but not yet clear of inflationary pressures. For many traders, these crosscurrents were a reason to take profits and reduce exposure, adding another layer of selling pressure to an already fragile market.
This was not just a clearing of leverage, but also a reaction to doubts about how far policy support can carry risk assets. As Nassar Achkar of CoinW put it, the flushout “may present a near-term adjustment rather than a shift in the long-term structural bull run.” That framing captures the balance: painful in the moment, but not necessarily indicative of a larger breakdown.
🫥 What It Means for Crypto
For investors, the weekend served as both a reminder of crypto’s volatility and a demonstration of its resilience. Massive liquidations may sting in the short term, but they reduce excess leverage and leave the market on more stable footing. Historically, September has been one of Bitcoin’s weakest months, the so-called “Red September,” yet October has earned the nickname “Uptober,” with gains in 10 of the last 12 years.
What makes this cycle distinct is the structural layer of institutional demand now underpinning the market. Spot ETFs continue to attract billions in inflows, corporate treasuries are steadily adding crypto to their balance sheets, and Wall Street heavyweights like Morgan Stanley are preparing to offer direct crypto trading through platforms like E-Trade. These shifts mark a profound difference from past cycles, where retail speculation drove the narrative. Today, longer-term capital with deeper pockets is helping define the floor.
And the drumbeat of political adoption is getting louder. This week, former California Assembly Majority Leader Ian Calderon announced his run for governor, making headlines with a bold statement: “My generation pays bills on our phones, we save in bitcoin, but the people in our government are trying to use yesterday’s ideas to solve today’s problems.” California’s USD 4 trillion balance sheet makes the idea of Bitcoin entering state-level strategy a potentially massive signal. While it’s too early to tell whether this is genuine policy momentum or just campaign hype, it underscores the extent to which crypto is moving into the political mainstream.
Macro uncertainty still clouds the outlook, but the broader story is one of resilience and maturation. Rather than the beginning of a new crypto winter, the sell-off looks more like a reset within an ongoing bull cycle. If history rhymes, the washout of excess leverage and the continued flow of institutional, and even political, support could strengthen the market’s foundation heading into year-end.
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