How Margin Trading Explodes the crypto market: The Truth from $35B Plummet to Chain Get Liquidated

What has happened in the market recently? Ethereum's open interest has fallen from 35 billion USD to 30 billion USD, while BTC hovers between 112,000 and 118,000 USD. On the surface, it seems to be a technical adjustment, but the truth behind it is even more heart-wrenching: the chain reaction of leveraged liquidations is swallowing retail investors' profits.

Why is leveraged trading so dangerous?

In simple terms, leverage is using $1,000 to control a $10,000 position (10x leverage). It sounds like a quick way to make money, but this thing is a double-edged sword.

Data Speaks: When BTC or Ether falls by 5%, a 10x leveraged long position can get liquidated by 50% directly. Even more terrifying is that this is not an isolated case — it can trigger a “domino liquidation”.

How Chain Liquidations Ruin the Market

Imagine a domino effect:

1. Retail investors chase long positions with high leverage
2. Price slightly retraced → Get Liquidated
3. Exchange Liquidation → Dump Sell
4. More people Get Liquidated → Price continues to fall
5. Finally evolved into a panic fall

ETH is indeed a recent living textbook. Open interest has dropped from $35B to $30B, so where did the $5B go? It’s all the tears of the retail investors getting liquidated.

What is the current market rhythm?

Current BTC Price: Repeatedly confirming support between 112,000 and 118,000. The technical aspect has not yet broken through key levels, but market sentiment has clearly become more cautious.

Current Status of ETH: Consolidating in the range of 4100-4600. Although there hasn't been a significant drop, the trading volume is noticeably sluggish, indicating that large investors are watching.

Key Question: Why is the market so fragile? Three words - too much leverage.

How great is the macro pressure?

The crypto market is now held hostage by three things:

• Central Bank Direction: Federal Reserve meeting, interest rate expectations, a single sentence can trigger a $50 billion capital flow.
• Inflation Data: The numbers directly determine whether to buy the dip or flee.
• Geopolitics: Trade wars, regional conflicts, retail investors simply can't hold on.

There is also a curse called “September Curse.” Historically, this month has seen numerous liquidations, causing many retail investors to reflexively panic in September.

Leveraged ETFs are becoming a ticking time bomb

The market is flooded with high-leverage ETF products, claiming to “amplify profits.” The problem is that these tools attract retail investors to go All-in during a bull market, but turn into a slaughterhouse during a bear market.

If you don't manage risks well, a black swan event can wipe you out. Coins like Solana and XRP, which have medium liquidity, almost hit rock bottom during liquidation.

Retail Investors vs Institutions, Who is Cutting Whom?

Retail Investor Logic: FOMO emotions peak → high leverage chasing highs → Get Liquidated

Institutional Logic: Stable holding + positioning at the bottom → Waiting for retail investors to take over the chips

This is why institutions always make money while retail investors often lose. One chases short-term fluctuations while the other looks at long-term trends.

What will happen next?

BTC and ETH haven't seen any breakout signals in the short term, but the long-term logic is still in place. However, the current market is like a balloon full of air:

• Positive news → FOMO lifts the car
• Bad news → Everyone stampedes

The approval of the Bitcoin ETF has indeed attracted institutions, and the regulatory framework is also improving. This will gradually reduce volatility, but in the short term, we still have to watch the leverage funds.

Last Words

Leverage trading is not a money-making code, but a wealth distribution mechanism. The more people participate, the larger the scale of Get Liquidated, and the more volatile the market becomes.

If you want to survive in this market, remember one principle: There is no absolute certainty, don't touch leverage. Those products that claim “stable returns” are often the most dangerous traps.

The market is now waiting for a definite direction. Whether it will be a good or bad outcome, no one knows. But one thing is certain - there will definitely be people you know on the next liquidation list.