The latest liquidation wave appears to have been triggered by excessive leverage building up across the altcoin market.
According to Glassnode, Open Interest for top altcoins hit an all-time high of $45 billion just before the sell-off.
Source: Glassnode
As can be seen on the chart, this surge began in early July, reflecting a sharp hike in speculative activity.
Usually, such parabolic spikes in leverage have preceded violent market corrections. With positioning stretched and funding rates elevated, it took only a minor price drop to spark a chain reaction of liquidations across the board.
Going forward
Crypto markets remain highly sensitive to leveraged positioning, especially in the altcoin sector. While Bitcoin stayed relatively stable, the scale of liquidations in other coins suggests that sentiment became overly euphoric.
Unless Open Interest resets to healthier levels, further volatility will be likely. Particularly if macro uncertainty or profit-taking trigger additional downward pressure. For now, the market may enter a cooling-off period, with traders more cautious about aggressive long exposure.
On the contrary, if leverage quickly returns, another liquidation cascade may not be far behind.
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