The cryptocurrency market is showing signs of stabilization as excess leverage diminishes following the severe October crash. Despite positive economic signals, the downturn persisted due to high leverage amplifying institutional outflows. Recent data indicates traders are closing positions, potentially paving the way for recovery.
The crypto market endured a major setback in October 2025 with what has been called 'Crypto Black Friday,' the largest liquidation event in cryptocurrency history. Over $19 billion in leveraged positions were wiped out, triggered initially by President Donald Trump's announcement of a 100% tariff on China. This event exposed deeper vulnerabilities, leading to multiple liquidation waves in November, each exceeding $1 billion.
Even as positive factors emerged—such as interest rate cuts, liquidity injections, and a declining US dollar index—Bitcoin and the broader market failed to rally. In mid-November, Bitcoin's price continued to drop despite Trump's declaration that making America 'number one in crypto' was a top priority, as noted in the Kobeissi Letter. The analysis pointed to institutional outflows as the initial pressure, but excessive leverage turned a potential controlled pullback into a cascading sell-off.
'The problem becomes excessive levels of leverage AMID these outflows…Excessive levels of leverage have resulted in a seemingly hypersensitive market,' the Kobeissi Letter stated. This forced selling pushed prices lower, triggering more liquidations and accelerating the decline.
Signs of improvement are now evident. Coinglass data shows a sharp drop in Bitcoin's open interest, signaling traders closing futures and perpetual positions to reduce leverage. Alphractal reported that Bitcoin experienced peak leveraged trading between August and November, reaching up to 80 million trades across 19 exchanges in a single day; the seven-day average has since fallen to 13 million. 'After the major liquidation event in October, the market became far more cautious toward BTC and leverage itself,' the report observed.
Ethereum's leveraged activity remains higher, with a peak of nearly 50 million trades in 2025 and a recent seven-day average of 17.5 million, suggesting a shift away from Bitcoin trades. Analyst NoLimit noted that for altcoins, 'excess leverage is being removed,' which is viewed positively. While the market stays fragile, this deleveraging could weaken key structural risks and support a more stable foundation for future recovery.
