Bitcoin’s recent sharp decline below the $100,000 mark in late 2025 is strongly linked to a significant liquidity crunch in the cryptocurrency market. This liquidity crisis has been characterized by massive deleveraging, institutional outflows, and a dramatic reduction in market capitalization, which collectively have intensified selling pressure and price volatility for Bitcoin and other digital assets.
Throughout October and into early November 2025, the crypto market experienced what has been described as a “liquidation apocalypse,” where excessive speculation collided with insufficient liquidity. This led to a trillion-dollar wipeout in total crypto market capitalization and pushed Bitcoin below $100,000 for the first time since June 2025. The crisis exposed the market’s heavy reliance on internal capital recycling and showed how quickly momentum can reverse when external economic pressures combine with high leverage among traders[1].
The liquidity crunch was exacerbated by a cascade of futures market liquidations, with over $1 billion in leveraged long positions wiped out during the November 3-4 selloff alone. Total open interest in Bitcoin futures dropped by more than $10 billion from its October peak. This deleveraging event mirrored a historic crash in October 2024, which saw the largest single-day liquidation in crypto history. Such rapid unwinding of leveraged positions drained liquidity from the market, making it harder for buyers to step in and stabilize prices[2].
Several broader macroeconomic and sector-specific factors contributed to this liquidity squeeze. These include fears surrounding the artificial intelligence bubble, weakness in the technology sector, and hawkish monetary policy from the Federal Reserve. These elements shifted institutional sentiment away from risk-on assets like Bitcoin, which had been trading more like a leveraged bet on growth rather than a digital safe haven. The resulting risk-off environment led to increased selling and reduced buying interest, further tightening liquidity[2].
Trading volumes surged dramatically during the initial sell-off, reflecting widespread panic selling. However, buy-side volumes have since diminished, worsening price volatility and making it difficult for Bitcoin to hold key support levels around $99,000. Failure to maintain these levels could push prices down to $92,000 or lower, near significant historical support zones and average acquisition prices for major Bitcoin ETFs[1].
Despite the turmoil, some institutional investors have shown signs of buying the dip, with firms like Ark Invest reportedly increasing their Bitcoin holdings. Meanwhile, Bitcoin’s supply dynamics remain fundamentally bullish in some respects, with exchange reserves hitting five-year lows and a large portion of Bitcoin supply remaining illiquid or dormant for extended periods. This suggests that while liquidity is tight in the short term, long-term holders are not rushing to sell, which could help stabilize the market eventually[2].
The liquidity crunch also led to intervention by the Federal Reserve, which conducted unscheduled repo operations to support bank balance sheets and ease liquidity pressures in the broader financial system. This indicates that the liquidity issues affecting Bitcoin are intertwined with wider financial market stresses, not isolated to crypto alone[3].
In summary, Bitcoin’s fall below $100,000 in late 2025 is closely tied to a severe liquidity crunch driven by massive deleveraging, institutional outflows, and broader economic headwinds. The market’s dependence on leveraged positions and internal capital recycling made it vulnerable to rapid reversals when external pressures mounted. While some institutional buying and low exchange reserves offer hope for recovery, the immediate environment remains challenging with heightened volatility and uncertain support levels[1][2][3].