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This week’s markets reminded us just how quickly risk-on sentiment can flip. Dramatic volatility hit both equities and crypto, with Bitcoin suffering the largest liquidation event in history, $19 billion wiped out in just 24 hours.

The move exposed dangerously crowded positions and showed how fragile markets become when leverage meets thin liquidity. This reset highlights why disciplined positioning remains key as we navigate 2025’s macro and geopolitical landscape.

Here’s what we’ll cover today:

Let’s dive in 👇

The markets delivered a masterclass in volatility this week. Dramatic swings across equities and digital assets reminded investors how quickly sentiment can flip, especially under U.S. President Donald Trump. Let’s break down the key moves and developments.

Bitcoin suffered the most violent liquidation event in crypto history, with $19 billion in leveraged positions wiped out in just 24 hours, nearly nine times the previous record. A single $20,000 daily drop erased $380 billion in market cap, a move larger than all but 25 public companies worldwide. The selloff was brutally one-sided: $16.7 billion in longs were liquidated versus $2.5 billion in shorts, exposing dangerously crowded bullish positioning. What began as a routine dip around 9:50 AM ET accelerated sharply after Trump’s 100% China tariff announcement at 4:50 PM ET, hitting markets during thin Friday liquidity and triggering a domino effect few leveraged traders could withstand.

Equity correlations had fallen to extreme lows before the move, reflecting complacency and a focus on stock-specific stories rather than macro risk. The sharp selloff following Trump’s announcement revealed just how fragile that environment had become, low correlations tend to snap back violently when macro shocks hit. This volatility spike likely marks the beginning of a re-correlation phase, as markets reprice geopolitical and trade risks.

The S&P 500 had been relentless since March, breaking record after record on AI optimism and strong earnings, nearly touching the 7,000 level. Trump’s tariff move provided the long-awaited catalyst for a correction, a genuine trigger to unwind the excessive leverage that had built up. The result: the largest single-day equity drop in six months, a needed reset for positioning that had grown dangerously one-sided.

Every major index, the SOX, Nasdaq-100, S&P 500, Russell 2000, and Bloomberg Magnificent Seven, saw its steepest pullback in half a year. This wasn’t a sector rotation but a broad deleveraging across all corners of the market. The synchronized retreat shows that risk exposure had become a crowded trade in the same direction. When the tide went out, it revealed just how extended positioning had become across growth, tech, semiconductors, and small caps alike.

While Bitcoin has since rebounded toward $115,000, the scars from this week remain. The liquidation cascade exposed how fragile markets can be when leverage meets thin liquidity, especially over weekends. The real lesson isn’t the crash itself, but how imbalanced the market had become. One policy announcement was enough to remind everyone that powerful trends can reverse in an instant. For retail investors, this week was a stark reminder: leverage amplifies both gains and losses, and being early can look a lot like being wrong.

With Bitcoin experiencing record liquidations and a sharp selloff, the Crypto Fear and Greed Index dropped significantly, from greed levels near 80 to a low of 25 on Sunday, October 12th. It has since recovered slightly, now sitting at 37, still in fear territory, while price has rebounded to around $115,500 at the time of writing.

For now, we view this as a healthy and much-needed reset in both positioning and sentiment. As mentioned previously, the risk-on trade had become overcrowded and overleveraged. With record liquidations now flushed out, the market appears better positioned for a more sustainable recovery.

Bitcoin Spot ETF net flows closed last week exceptionally strong, with positive inflows recorded every day except Friday, which saw only a minor $4.5 million outflow. Average daily inflows over the week reached $675 million, with Monday leading at $1.19 billion. We’ll be watching closely to see if institutional demand and TradFi inflows remain resilient despite the weekend’s volatility, though much will depend on how macroeconomic conditions evolve in the coming days.

The most important macro event for crypto and risk assets this week will be Tuesday’s speech by Fed Chair Jerome Powell, which comes as the U.S. government data blackout continues amid the ongoing shutdown. With most key economic indicators still offline, Powell’s comments will serve as the market’s primary guidance on monetary policy direction.

Investors will also focus on the OPEC Monthly Report (Monday) for fresh insights into energy market dynamics, as well as the NY Fed (Wednesday) and Philly Fed (Thursday) Manufacturing Indexes, which will help gauge the strength of U.S. industrial activity. The NAHB Housing Market Index (Thursday) adds another layer to the macro picture, while around 10% of S&P 500 companies are scheduled to report earnings, providing a key read on corporate sentiment.

With limited official data available, markets will remain highly sensitive to Powell’s tone. Any hint of dovishness could sustain the recovery in Bitcoin and broader risk assets, while a more cautious or hawkish signal may temper momentum heading into the weekend.

After dropping more than 13% in under eight hours, Bitcoin has stabilized around the $109,300 key technical level and rebounded, reclaiming $111,900 and $113,300. It is now hovering near $115,400, looking to reclaim this level as well.

The drop effectively cleared out all remaining leveraged long liquidations below current prices, as shown on the two-week liquidation heatmap. It also highlights that most significant liquidation levels now sit above price, clustered just beyond the all-time highs around $126,400, suggesting potential for a sharp upside reversal if market makers target that liquidity.

Bullish Scenario
In the bullish case, Bitcoin reclaims $115,400 and continues higher, quickly regaining strength and resuming the uptrend. Long opportunities emerge on a confirmed reclaim of this level, with take-profit targets at $116,900 and $118,300, and invalidation if price fails to hold above entry.

Bearish Scenario
In the bearish case, Bitcoin fails to reclaim $115,400 and faces rejection. Short setups may develop on a confirmed bearish retest, targeting the $113,400 level below, with invalidation if price reclaims the entry zone and moves higher.

With the recent liquidation event, as history has shown, when Bitcoin corrects, altcoins tend to fall even harder, and this time was no different. The TOTAL3 index dropped over 27% during the same hours Bitcoin fell 13%, while the OTHERS index declined more than 47%. As Bitcoin began recovering, altcoins followed suit, with both indices moving higher again. TOTAL3 has now reclaimed $1.05T and is approaching the $1.09T level, bringing it closer to the $1.13T pre-liquidation zone that was initially lost.

Ethereum/Bitcoin (ETH/BTC) also declined sharply, retesting the lower technical level at 0.03255, before rebounding. It is now approaching the 0.03723 key level, looking to reclaim it and potentially signal a phase where Ethereum and altcoins could begin outperforming Bitcoin again.

Events like these underscore how vulnerable altcoins remain when Bitcoin weakens or liquidation cascades occur. This is why our focus has stayed on high-cap, established assets, which helped minimize downside risk in this scenario. Nevertheless, we remain bullish into year-end, and continue to believe that Bitcoin and the broader crypto market have not yet topped out.

We hope this report provided you with valuable insights into the latest market developments and geopolitical shifts.

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As always, stay informed, stay prepared, and have a fantastic week ahead! 🚀

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