Liquidity Stress and Policy Shocks: Inside Crypto’s Early November Correction

Between 28 October and 5 November 2025, the cryptocurrency market experienced one of the most volatile periods of the year. A sharp macro-induced downturn, coupled with heavy whale distribution and derivative liquidations, drove prices lower across the board. Bitcoin fell 11% from $114,182.80 to $101,635.30, while Ethereum dropped 20% from $4,123.21 to $3,296.74. Bitcoin’s market capitalisation contracted by 2.1%, sliding from $2.27 trillion to $2.20 trillion. Despite the scale of the drawdown, network activity and institutional developments continued to demonstrate structural resilience. 

The broader risk-off tone stemmed from monetary policy uncertainty in the United States, which reverberated across global markets. The sell-off was intensified by large on-chain movements from early Bitcoin holders, aggressive unwinds in the derivatives market, and a strengthening US dollar that added pressure to all risk assets. While the short-term trend was negative, several indicators pointed to underlying maturity within digital asset markets, particularly through record stablecoin activity, expanding mining infrastructure, and persistent institutional engagement. 

The United States’ Federal Reserve’s 29 October meeting served as the defining macro catalyst for the downturn. While the central bank delivered the expected 25 basis point rate cut, lowering the federal funds rate to 3.75%–4.00%, Chair Jerome Powell’s comments were markedly more hawkish than markets anticipated. Powell stated that a further rate reduction in December was “not a foregone conclusion”, emphasising divisions within the Federal Open Market Committee regarding the future policy path. This statement sharply altered expectations, with the probability of a December rate cut collapsing from 96% to below 70% according to the CME FedWatch Tool. 

Powell also suggested that interest rates may have reached a “neutral” level, implying that additional easing was no longer assured. The accompanying decision to end quantitative tightening from 1 December 2025 was interpreted not as a stimulus, but as a stabilisation measure. The Fed’s cautious tone triggered an immediate flight to safety, lifting the dollar and weighing heavily on risk assets. For the crypto market, which had been buoyed by expectations of a prolonged easing cycle, this policy shift represented a significant sentiment reversal. 

As macro pressure mounted, on-chain data revealed substantial movements from long-term Bitcoin holders. A 14-year dormant wallet transferred 10,000 BTC, worth approximately $1 billion, to exchanges in early November, marking one of the largest redistributions by an early Bitcoin participant in recent years. This transaction coincided with several high-profile inflows from known entities. The pseudonymous trader “BitcoinOG”, recognised for short positioning, deposited roughly 13,000 BTC, equivalent to $1.48 billion, across multiple exchanges including Kraken, Binance, Coinbase, and Hyperliquid. Similarly, Owen Gunden, a Satoshi-era holder, transferred around 3,265 BTC ($364.5 million) to Kraken in batches over late October and early November. 

Over the weekend preceding 3 November, more than $600 million in Bitcoin was transferred from whale wallets to exchanges. The concentration and timing of these inflows created a perfect environment for a liquidity squeeze, overwhelming order books and accelerating the sell-off. These actions reflected profit-taking and strategic repositioning by large holders rather than broad-based investor panic, yet the mechanical impact on market prices was immediate and severe. 

The pressure from whale distribution cascaded into derivatives markets. On 3 November, more than $400 million in leveraged long positions were forcibly liquidated within 24 hours, affecting over 162,000 traders globally. Bitcoin accounted for approximately $74.6 million of these liquidations, while Ethereum totalled $85.6 million. The liquidation event was triggered as Bitcoin fell below the $106,000 support level, a breach that activated stop-loss orders and margin calls across exchanges. 

This wave of liquidations was exacerbated by positive funding rates, which averaged 0.0100%–0.0148% across major platforms, indicating that traders maintained long exposure even as prices declined. Analysts estimated that a continued breakdown could have exposed as much as $6 billion in additional liquidations, a scenario partially realised by 5 November when Bitcoin briefly traded below the $100,000 threshold. The episode underlined the fragility of leveraged market structures and their capacity to amplify directional moves during periods of macro stress. 

Institutional sentiment shifted notably during this period. United States spot Bitcoin exchange-traded funds, which had previously served as a stabilising demand source, recorded cumulative net outflows of $1.15 billion in the week ending 1 November. Outflows were led by funds managed by BlackRock, ARK Invest, and Fidelity, marking the first sustained redemption phase since their inception. The reversal suggested that some institutional participants were tactically de-risking portfolios amid rising macro uncertainty. 

At the same time, the Bitwise Solana Staking ETF, launched on 28 October with $400 million in initial inflows, declined nearly 20% in its first week. The combination of redemptions from Bitcoin ETFs and weak altcoin-linked product performance indicated a broader pullback in institutional appetite for high-beta digital assets, even as overall participation within the sector remained structurally intact. 

The strengthening of the United States dollar compounded crypto market weakness. The Dollar Index (DXY) climbed from 98.0 in late September to above 99.7 by 5 November, briefly surpassing the 100.0 mark for the first time since August. Historically, Bitcoin exhibits a negative correlation with the dollar, and this relationship held firmly during the period. The 1.7% appreciation in the DXY corresponded with Bitcoin’s 12% decline, reinforcing the currency’s role as a macro headwind. 

A stronger dollar typically reflects tighter financial conditions and higher real yields, both of which reduce appetite for alternative and speculative assets. The move also dampened international demand, as non-dollar investors faced a relative cost increase in acquiring Bitcoin and Ethereum. 

Despite market turbulence, core blockchain fundamentals remained resilient. Bitcoin’s mining difficulty increased by 6.3% to reach an all-time high of 155.97 trillion, supported by a record hash rate of 1.13 zettahashes per second. This indicated that mining operations continued to expand even amid reduced profitability, demonstrating long-term confidence in network economics. 

On Ethereum, daily transactions reached 1.6 million on 28 October, while active addresses remained near 695,000. Transaction fees held at multi-month lows of roughly $0.01 per transfer, reflecting efficiency gains from the Pectra upgrade. These data points showed that network utilisation and infrastructure health remained robust, even as speculative positioning unwound in the markets. 

The derivatives landscape showed heightened but orderly stress. On Deribit, the world’s largest crypto options exchange, Bitcoin open interest reached a record $50.27 billion at end-October. The put-to-call ratio settled at 0.70, indicating slightly bullish sentiment despite recent declines. Around $16 billion in Bitcoin and Ethereum options expired on 31 October, with Bitcoin’s maximum pain level positioned at $114,000, substantially above spot prices. 

Volatility increased notably, with Bitcoin’s 30-day realised volatility rising from 50% to 65% annualised, while implied volatility for November maturities climbed to approximately 42%. This divergence suggested that markets were underpricing the probability of further large moves, a common feature in post-liquidation phases when option sellers recalibrate exposure. 

Institutional engagement in digital assets continued to advance. JPMorgan Chase confirmed that it would begin accepting Bitcoin and Ethereum as collateral for institutional loans by the end of 2025, using third-party custodians to maintain segregation of client assets. The announcement highlighted the ongoing integration of crypto instruments into traditional financial infrastructure. 

From a regulatory standpoint, the US Securities and Exchange Commission and Commodity Futures Trading Commission reaffirmed their intent to harmonise oversight of spot and derivative crypto products. The SEC’s Spring 2025 agenda outlined proposals to modernise custody rules, define dealer scope for digital assets, and update transfer agent regulations. These developments signalled a gradual but tangible shift toward more defined compliance frameworks, enhancing institutional confidence in the sector’s long-term viability. 

Market sentiment deteriorated sharply during this period. The Crypto Fear and Greed Index fell back into the “Fear” zone, reflecting retail capitulation and short-term pessimism. Exchange data showed an 80% decline in small retail Bitcoin deposits compared to early 2023 levels, while on-chain analytics identified accumulation among large holders. This behavioural divergence suggested that retail traders were reducing risk, whereas institutional investors viewed the drawdown as an opportunity to reallocate strategically. 

Such structural polarisation is increasingly characteristic of a maturing market, where speculative excess gives way to disciplined capital deployment and risk management. 

The period between 28 October and 5 November 2025 encapsulated the interplay between macroeconomic policy, on-chain market structure, and institutional positioning. The Federal Reserve’s shift in tone catalysed a chain reaction that exposed leverage imbalances and triggered systematic liquidations across both retail and professional trading venues. However, the broader ecosystem demonstrated notable resilience. 

Network utilisation, mining activity, and stablecoin velocity remained robust. Institutional infrastructure continued to evolve, and regulatory clarity showed incremental progress. Although the short-term sentiment was dominated by caution, the underlying architecture of digital assets remained fundamentally strong. 

This episode reaffirmed that the cryptocurrency market’s sensitivity to monetary conditions remains significant, yet its internal resilience continues to deepen with each correction. As the market transitions toward greater institutional participation and regulatory maturity, volatility episodes such as this one serve less as systemic shocks and more as recalibrations within a developing financial ecosystem

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