Foreign media reports indicate that the cryptocurrency market reversed its upward trend in late May, with total market capitalization falling significantly from its mid-month high. The article argues that this correction was not merely a weakening of individual cryptocurrencies, but rather a broader contraction in liquidity, indicating a shift from an expansionary to a defensive market.
More than $300 billion was lost in a week
In early May, the overall cryptocurrency market continued its upward trend, with the total market capitalization rising from approximately $2.52 trillion to between $2.75 trillion and $2.80 trillion. However, after several failed attempts to hold these high levels, the upward momentum gradually slowed after mid-May.
From May 24 to 30, the decline accelerated significantly. The total market capitalization once fell to approximately $2.48 trillion, a loss of over $300 billion from its previous high. During the same period, 24-hour trading volume rose to $89.65 billion, indicating that trading activity continued to increase despite the price drop.
Long position liquidation becomes the main pressure.
As prices fell below some key levels, leveraged positions began to be liquidated en masse. Data shows that in the 24 hours prior to this report, the total liquidation amount in the market reached $282.08 million, of which $157.85 million were long positions liquidated, higher than the $124.23 million of short positions.
In terms of assets, Bitcoin liquidations amounted to approximately $80.99 million, Ethereum approximately $59.2 million, and Hyperliquid's HYPE and Stellar XLM also saw significant liquidations. Based on this, the article concludes that this is more likely a reset driven by leverage contraction than a complete, out-of-control sell-off.
ETF fund flows continued to weaken.
The article also mentioned that, in addition to derivatives, institutional funds are also becoming more cautious. On May 29, Bitcoin and Ethereum ETFs recorded a combined net outflow of $148.8 million, and the broader withdrawals have exceeded $1.2 billion.
In the author's view, ETF funds typically represent relatively stable incremental demand. When this buying weakens, downward pressure on the market will be more directly transmitted to both the spot and derivatives ends. At the same time, the size of open interest has also fallen by about 1%, further reflecting that leverage is cooling down.
The article argues that the current adjustment has significantly reduced the overheated trading of the previous period. Whether the market can stabilize next depends not on whether leverage is amplified again, but on whether new spot funds are willing to re-enter the market at the current price level.
