Crypto Markets released $300 billion in value between September 18th and September 28th. This is because excessive traders faced forced liquidation of $7.3 billion over the period, exposing the structural vulnerability of the market prior to the expected upward movement in the fourth quarter.
The total market capitalization plunged from $4.2 trillion to $3.9 trillion as traders were forced to close. According to Coinglas data, September 21 marked a peak destruction, with over $3.6 billion being liquidated.
Cascade sparked an automatic liquidation engine that began during low-liquid weekend trading when Bitcoin poured nearly $900 million in leveraged positions, creating self-enhancing sales pressure.
Another crash on September 25th saw Bitcoin go from $118,000 to $109,000, but Ethereum fell below its significant $4,000 support level for the first time since August.
Leverage ratio has reached its limit
Open interest on Bitcoin futures reached nearly $86 billion prior to the crash, with Binance looking at $400 million open profit on September 21, and OKX recorded the largest single liquidation of Bitcoin worth $12.74 million.
High Liquid witnessed one trader loses $29 million in one Ethereum position during the September 25 crash. The leverage concentration meant that if Bitcoin violated a $118,000 resistance and fell below $112,000, the liquidation cascade would be unstoppable.
The exchange clearing engine automatically closed its underwater position, lowered the price, causing an additional liquidation of a downward spiral that ingested itself for several days.
Ethereum suffered a personal loss of $2.2 billion between September 18th and 28th.
Fed disruption amplifies market stress
The Federal Reserve’s 25 basis points rate cut on September 17 was characterized by Chairman Jerome Powell as “risk management reduction” rather than the beginning of sustained mitigation.
Mixed messaging, consisting of reductions caused by labor market weakening while maintaining vigilance of inflation, has made it unclear whether the Fed is operating a soft landing or falling behind the curve.
Additionally, revised pay data released on September 9 revealed that employment growth was small until March, putting pressure on the US economic situation. Meanwhile, core inflation accelerated to 3.1%, causing fear of stags that historically caused risk-off behavior.
Traditional market volatility was sent directly to the crypto as the correlation was tightened. The S&P 500 recorded its first loss week in four weeks, with Oracle down 16% from its recent high. The US-trading spot Bitcoin ETF recorded a $360 million outflow on September 22 alone.
There will also be a government closure approaching September 30th at the end of the fiscal year. Although short shutdowns have historically had a minor impact on the market, current financial tensions and the global macroeconomic landscape can amplify these risks.
Meanwhile, European Central Bank (ECB) officials shocked the market by holding the changed interest rate for a 2% consecutive meeting on September 11, ending eight straight cuts.
President Christine Lagarde emphasized that the policy is a “good place” with target inflation and would remove another potential source of liquidity that traders had expected.
Regulation advances during market sweep
The timing of the crash coincided with the proposed rulemaking advance notice issued by the Ministry of Finance for the Genius Act in September, seeking public comment on implementation details.
SEC Chair Paul Atkins and Acting CFTC Chair Caroline Fam issued a joint statement on September 2nd.
The agency has announced a comprehensive regulatory harmonization initiative with a year-end “innovation exemption” plan that will allow for immediate product launches.
On September 17, the SEC unveiled its long-awaited general listing criteria to streamline approval for US crypto ETFs.
The European Bank established a consortium on September 25th and by 2026 it launched euro stability in accordance with mica.
Despite leverage rewinding, regulatory clarity allows for long-term institutional adoption.
I hope that recovery will continue
Despite the September destruction, the market remains bullish for the fourth quarter based on metric adjustments.
Polymerket’s odds for interest rate cuts at 25 bases in October exceed 80% as analysts continue to forecast three cuts this year.
Additionally, the SEC generic list standard allows you to open Floodgates for Altcoin ETFs as more than 100 filings await regulatory approval.
According to a September 29 report, the SEC has already asked issuers to withdraw applications for XRP, Litecoin, Solana, Cardano and Dogecoin ETFs. This requirement is due to the ETFS set approved under the new general purpose standard.
Grade 2 cuts combined with significant regulatory development could strengthen the fourth quarter starting in October.
For those who survived September, the next quarter will provide new opportunities to implement effective risk management and leverage potential upward movements.