Crypto Crash Wipes Out $700M as ETH and XRP Lead Long Squeeze Liquidations

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The recent dip in major cryptocurrencies like Bitcoin, Ethereum, XRP, and Solana isn’t being driven by new bearish bets. Instead, it’s mostly due to what’s called a long squeeze, a market event where bullish traders are forced to exit their positions, often causing sharp price drops.

What is a Long Squeeze and Why is It Happening Now?

A long squeeze happens when traders who expected prices to go up had used leverage to open bullish positions but then exit those positions as prices start falling. This causes further price drops, not because people are turning bearish, but because leveraged bets are being unwound.

This is exactly what played out on Thursday. Bitcoin slipped nearly 1% after failing to stay above $120,000. Ethereum dropped 3%, Solana fell 8%, and XRP led the losses with a 13% decline. The overall crypto market fell 6.8% in the last 24 hours. But this pullback wasn’t fueled by traders turning bearish.

Instead, over $700 million in long positions were liquidated within 24 hours, especially in ETH and XRP. A sudden 1.57% spike in Bitcoin dominance after a 9-day slump surprised the market and triggered liquidations across altcoins.

1/ Over $700M in leveraged longs were liquidated in 24h
ETH and XRP were the main culprits

The real reason though is $BTC.D closing up +1.57% after a 9-day downtrend

This spike shocked the market, triggering liquidations across alts

BTC held up well and this looks like a… pic.twitter.com/l9uSZ3e58M

— Aaron Dishner (@MooninPapa) July 24, 2025

Open Interest Drops Confirm Longs Are Being Closed

Key futures data support this view. Open interest, which shows the number of active contracts, has dropped across the board. XRP’s futures open interest fell more than 6% over the past two days. Solana dropped 5%, Ethereum 2%, and Bitcoin 1.5%, according to data from Velo.

If new short (bearish) positions were causing the drop, open interest would have risen, not fallen. At the same time, funding rates remain positive, suggesting the majority of remaining traders continue to expect upward moves. If bearish sentiment were taking over, funding would flip negative, so this drop in open interest is a sign of longs closing out positions, not fresh shorts entering.

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Why This Isn’t All Bad News

Though prices are down, the long squeeze is often seen as a healthy reset. Meanwhile, the broader crypto market maintains a healthy mood, with sentiment indicators like the Fear & Greed index sitting at a neutral-to-bullish 67/100.

This suggests that while profit-taking is normal, long-term optimism remains intact, and a durable recovery may be forthcoming once leveraged positions are cleared.

It removes overly optimistic and over-leveraged bets from the market, potentially making the setup more stable for future moves. Since there’s no clear rise in bearish sentiment or short selling, it shows the pullback is more technical than emotional.

In short, crypto prices may have dropped, but it doesn’t mean the bulls have given up. It could just be the market clearing out some of the froth before trying to move higher again.