The crypto market suffered a sharp selloff on Friday, with prices sliding more than 6% as a wave of forced liquidations erased nearly $1.7 billion in leveraged positions. The sudden move caught traders off guard and highlighted how quickly risk sentiment can unravel when leverage, macro uncertainty, and geopolitical stress collide.
Liquidations snowball as longs get wiped out
According to data from CoinGlass, about $1.71 billion worth of leveraged crypto positions were liquidated over the past 24 hours. The bulk of the damage came from bullish bets, with long positions accounting for roughly $1.59 billion of the total.
The pace of liquidations was especially aggressive early on, with more than $909 million wiped out in the first 12 hours alone. In total, over 275,000 traders were liquidated across exchanges. The largest single liquidation occurred on HTX, where one trader lost a position valued at $80.57 million.
Liquidations occur when traders no longer have sufficient margin to maintain leveraged positions. When long positions dominate the wipeout, forced selling often accelerates downside momentum, pushing prices even lower.
Major cryptocurrencies tumble
The liquidation cascade sent shockwaves across large-cap cryptocurrencies.
Bitcoin fell nearly 8% on the day, dropping to a nine-month low around $81,300. Ethereum, XRP, and Solana each declined between 5% and 7%.
As prices slid, the total crypto market capitalization dropped by almost 6% to roughly $2.9 trillion, marking one of the steepest single-day declines since the October 10 liquidation event.
The Kevin Warsh effect rattles markets
One of the most immediate catalysts behind the selloff was a sharp shift in expectations around U.S. monetary policy leadership.
Prediction market Polymarket showed the odds of Kevin Warsh becoming the next Federal Reserve Chair surging to 94%, up from just 32% the day before.
Warsh is widely viewed as more hawkish than other potential candidates, favoring higher interest rates and tighter monetary conditions. Markets interpreted this as a potential end to the easy-money backdrop that has supported risk assets including crypto over recent years.
As expectations shifted, the U.S. Dollar Index rebounded sharply, putting immediate pressure on Bitcoin and other dollar-denominated assets.
Geopolitical tensions add fuel to the fire
Geopolitical developments further weighed on sentiment. U.S. President Donald Trump declared a national emergency and signed an executive order introducing aggressive tariffs on goods linked to oil suppliers to Cuba.
At the same time, rising tensions between the U.S. and Iran, along with threats of regional retaliation, unsettled global markets. These developments reinforced a risk-off environment, prompting investors to cut exposure across volatile assets.
Microsoft earnings deepen risk aversion
Investor confidence was also shaken by weak reactions to Microsoft’s fiscal second-quarter earnings report.
While Microsoft beat headline expectations, markets focused on a 66% surge in capital expenditure, totaling a record $37.5 billion, driven largely by AI infrastructure spending. Slowing cloud revenue growth added to concerns about the sustainability of AI-related investment.
Microsoft shares plunged nearly 12%, marking their worst single-day drop since March 2020 and wiping out approximately $440 billion in market value. The selloff spilled over into broader risk markets, including crypto.
Bigger picture
The $1.7 billion liquidation event underscores how vulnerable crypto markets remain during periods of macro stress, especially when leverage is elevated. A hawkish shift in Fed expectations, escalating geopolitical risks, and cracks in the tech sector combined to create a perfect storm for forced selling.
Until volatility cools and macro signals stabilize, traders may remain cautious aware that in highly leveraged markets, downside moves can accelerate quickly.
