- Massive liquidations and the Bybit hack triggered a $150 billion market sell-off
- Falling capital inflows and rising risk aversion continue to drain liquidity from crypto markets
The cryptocurrency market is facing a severe sell-off, with major assets losing billions in value. At press time, Bitcoin [BTC] was trading at $88,993, down 7.21% in the last 24 hours. Ethereum, XRP, and Solana were also suffering double-digit losses. Ethereum was down 10% to hit $2,426, XRP dropped by 10.99% to hit $2.21, while Solana lost 12.62% of its value to trade at $139.37.
This sharp downturn has been fueled by multiple factors, including massive liquidations, dwindling capital inflows, and increasing risk aversion among investors. So, what exactly is causing this collapse?
Massive liquidations and the Bybit hack – A perfect storm for crypto
The crypto market saw $340 million liquidated in just one hour, with over $150 billion erased in the last 24 hours. This extreme volatility has triggered widespread panic selling, leading to steep losses across the board.
Compounding the crisis, the Bybit hack on 21 February 2025 dealt a massive blow to investor confidence. The exchange suffered $1.4 billion in losses, making it the largest financial heist in history.
Arkham Intelligence compared it to the $1 billion theft from the Central Bank of Iraq in 2003, highlighting the unprecedented scale of the attack. With investors withdrawing funds from exchanges to avoid exposure, liquidity is drying up and fueling the sell-off.
Source: X
Fading capital inflows and rising risk aversion – Why crypto is struggling
Another alarming factor is the dramatic decline in capital inflows. According to Ali Martinez, inflows into the crypto market have plummeted by nearly 50% in the last 10 days, shrinking from $52 billion to $26.5 billion.
This decline means fewer new funds are entering the market, making it harder for assets to rebound from steep losses. Without strong inflows, liquidation cascades accelerate, leading to deeper market crashes.
At the same time, investors are shifting away from risky assets like Bitcoin as volatility spikes in traditional markets.
For example – The Volatility Index (VIX) surged by 21.74% in just five days, signaling uncertainty in global financial markets. Historically, when risk appetite diminishes, investors dump speculative assets, worsening the crypto market’s downturn.
Source: X
Fear and Greed index confirms panic
Investor sentiment is rapidly deteriorating too, as reflected by the Crypto Fear and Greed Index. At the time of writing, it had a reading of 29 (Fear). Just yesterday, it was still neutral at 40 and a month ago, the market was in greed mode at 61.
Such a rapid shift means traders are exiting positions out of fear, further accelerating market declines. While extreme fear can sometimes signal a potential buying opportunity, the absence of capital inflows and ongoing panic selling can make a quick recovery unlikely.
Source: CoinMarketCap
So, why is crypto crashing? The market’s decline isn’t due to a single cause, but a combination of devastating factors.
The Bybit hack has shattered confidence, liquidations have intensified selling pressure, capital inflows have collapsed, and global markets are becoming more volatile. This has forced investors to exit risky positions.
The crypto market depends on liquidity to sustain price levels and right now, liquidity is vanishing. Unless inflows recover and market sentiment improves, the sell-offs may continue.
