Ethereum Liquidation Sparks Market Wide Sell Off Worth $2.5B

Crypto markets were recently shaken after a large Ethereum (ETH) liquidation on Hyperliquid sparked heavy forced selling.

Falling prices, high leverage, and low liquidity caused the losses to spread quickly across many exchanges. Within 24 hours, total crypto liquidations climbed beyond $2.5 billion, affecting hundreds of thousands of traders.

Ethereum Liquidation on Hyperliquid Started the Chain Reaction

The market downturn began when a very large ETH position on Hyperliquid, a decentralized exchange endorsed by Cathie Wood, was liquidated. As the top coin prices fell sharply, the position crossed its margin limit and was automatically closed. This single liquidation added a large amount of selling pressure into the market. 

Due to low liquidity, the market could not absorb the selling smoothly. Prices moved lower at a faster pace, increasing stress across the derivatives market. Ethereum suffered the most damage, with over $1 billion in positions wiped out in one day. 

This decline in Ethereum also pulled down the flagship crypto Bitcoin (BTC) and while other large tokens such as Solana (SOL) also saw heavy liquidations. The losses showed that leverage was built across the entire market, not limited to a single asset.

Leverage Fueled Losses Trigger Market Wide Liquidations

For context, leverage allows traders to control large positions with borrowed funds. Leverage can boost profits, but it also increases risk. When prices move the wrong way, losses grow fast.

If margin limits are broken, exchanges automatically close positions to stop bigger losses. As crypto prices kept falling, many leveraged long positions were closed at the same time. This caused a wave of liquidations across exchanges.

Most of the losses came from traders who were betting that prices would go up. This shows that the market was heavily positioned on the bullish side.

Hyperliquid saw the biggest share of liquidations, followed by Bybit and Binance. These losses showed how leverage can make small price drops turn into major sell-offs.

Past Liquidation Events Show Ongoing Risks of High Leverage

This wave of liquidations shows the continued risks of using leverage in crypto trading. A similar event happened in October 2025, when a massive liquidation wiped out over $20 billion from the crypto market.

This event caused an uproar in the crypto community, with some traders accusing Binance’s system for triggering the sell-off. The company’s founder and ex-CEO Changpeng Zhao recently dismissed these allegations and said they did not match the facts.

Until leverage levels reduce and market liquidity improves, similar events may continue to occur.