Over 100,000 Traders Liquidated as Bitcoin Plummets – What Happened?

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The cryptocurrency market is reeling after a dramatic selloff that wiped out more than $342 million in leveraged positions over the past 24 hours. According to CoinGlass data, over 100,000 traders were liquidated as Bitcoin plunged more than 7%, briefly dipping below $42,000 to trade at $42,562.10 at press time.

This sharp correction comes just one day after the historic launch of spot Bitcoin ETFs in the United States—an event many believed would fuel a new bull run. Instead, markets reacted with volatility, leaving investors questioning what went wrong and where Bitcoin is headed next.

Spot Bitcoin ETF Launch Sparks Volatility

On January 11, 2025, the U.S. Securities and Exchange Commission (SEC) officially approved the first wave of spot Bitcoin exchange-traded funds (ETFs), marking a watershed moment for crypto adoption. Initial enthusiasm sent Bitcoin soaring above $49,000—its highest level since December 2021.

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However, the rally was short-lived. By the next trading session, euphoria gave way to selling pressure. Bitcoin reversed course, tumbling below $44,000 and erasing all gains from earlier in the week. As of Friday’s U.S. market open, BTC had fallen over 7%, settling around $42,560.

The ETFs themselves mirrored the downturn. Most spot Bitcoin ETFs registered declines of about 6%:

Broader Market Impact: Miners, Exchanges, and Blockchain Stocks Hit Hard

The ripple effects extended beyond ETFs. Blockchain-related equities saw steep losses:

This broad-based selloff highlights how tightly linked traditional crypto markets are to sentiment around regulatory milestones like ETF approvals.

Why Did Bitcoin Crash After ETF Approval?

At first glance, the post-approval drop seems counterintuitive. But seasoned analysts point to a well-known market phenomenon: "Buy the rumor, sell the news."

Market Had Already Priced In the ETF Approval

For years, investors speculated about when the SEC would greenlight a spot Bitcoin ETF. In anticipation, Bitcoin surged over 60% in the three months leading up to approval. By the time the decision was announced, much of the bullish momentum had already been factored into prices.

CryptoQuant, a blockchain analytics firm, warned last month that once the ETF launched, a pullback to $32,000 could follow—precisely because expectations were so high.

Peter Schiff, a prominent financial commentator, noted:

“So far, the sell-off in Bitcoin, Bitcoin ETFs, and related stocks has been surprisingly orderly. I wonder when it will become more aggressive.”

His observation underscores growing caution among institutional watchers.

Fee Competition Driving Capital Rotation

Another key factor behind the volatility? Intense competition among ETF providers.

While Grayscale’s GBTC dominated trading volume—ranking among the top three most-traded ETFs on record—its fund actually experienced net outflows. Investors moved capital from higher-fee products to lower-cost alternatives.

Bitwise’s BITB ETF charges just 0.20%, the lowest fee in the sector, making it the most attractive option for cost-conscious investors. As a result, BITB saw the largest inflows, while other funds also reported positive net flows.

This intra-ETF capital shift doesn’t necessarily reflect bearish sentiment toward Bitcoin—it’s more about optimizing exposure.

Institutional Caution Slows Momentum

Despite regulatory approval, many major financial institutions remain on the sidelines.

Firms like Vanguard, Goldman Sachs, and Bank of America have not yet launched Bitcoin ETF offerings for their clients. Their hesitation stems from ongoing due diligence, compliance reviews, and internal risk assessments.

Even retail access is limited. Some brokerages—including Citigroup—are still evaluating whether to offer these products to individual investors. This creates frustration among eager buyers who can't access ETFs through their existing platforms.

One investor famously tweeted about transferring retirement funds from Vanguard to Fidelity just to gain access—highlighting both demand and fragmentation in distribution channels.

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Is This Decline a Setback or a Setup?

While painful for short-term traders, this correction may lay the groundwork for sustainable growth.

Limited Current Participation = High Future Upside Potential

With only a handful of institutions actively participating so far, the current market reflects early-stage adoption. As more asset managers, pension funds, and wealth advisors integrate Bitcoin ETFs into portfolios, fresh capital could flow in steadily.

Historically, new financial products take time to gain traction. Consider gold ETFs: they didn’t see massive inflows immediately but grew into multi-billion-dollar assets over years.

Similarly, if major custodians and platforms expand availability—and as fee competition drives down costs—Bitcoin ETFs could become mainstream portfolio allocations.

What’s Next for Bitcoin?

Short term: expect continued volatility as markets digest the ETF launch and traders adjust positions.

Medium to long term: fundamentals remain strong.

A drop to $32,000—should it occur—is likely temporary and could present a strategic entry point for long-term holders.

Frequently Asked Questions (FAQ)

Q: Why did Bitcoin drop after the ETF approval?
A: The price had already risen significantly in anticipation of approval. Once the news hit, traders took profits—a classic "sell the news" reaction.

Q: Are spot Bitcoin ETFs safe to invest in?
A: They are regulated financial products traded on major exchanges. However, like any investment tied to volatile assets, they carry risk and should be approached with proper research and risk management.

Q: Which Bitcoin ETF has the lowest fees?
A: Bitwise’s BITB charges just 0.20%, making it the lowest-cost option currently available.

Q: How many people were liquidated in the recent selloff?
A: Over 100,000 traders were liquidated within 24 hours, with total losses reaching $342 million.

Q: Will more brokerages offer Bitcoin ETFs soon?
A: Yes—firms like Citigroup and others are actively reviewing product offerings. As compliance frameworks mature, broader availability is expected.

Q: Could Bitcoin rebound despite this drop?
A: Absolutely. Market corrections are normal after major events. With increasing institutional interest and finite supply dynamics, many analysts expect Bitcoin to resume its upward trajectory later in 2025.

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