Crypto Market in Chaos: Bitcoin Sinks Below $106K as Panic Ripples Through Global Markets

The crypto world woke up in chaos this morning, October 18, 2025. Screens across trading desks glowed red as Bitcoin tumbled to $105,700, Ethereum slid to $3,764, and XRP flirted dangerously close to the $2 mark. In just 24 hours, the global digital asset market lost nearly $480 billion, wiping out two weeks of recovery gains.

The sudden crash has rattled both institutional desks and retail traders — a harsh reminder that even after a decade of evolution, crypto remains one of the most volatile asset classes on the planet.

The Spark: ETF Outflows and Credit Fears Collide

Analysts are pointing to a deadly cocktail of credit anxiety and ETF capital flight.

In the United States, mid-tier banks like Zions Bancorp and Western Alliance reignited contagion fears this week after posting weaker-than-expected balance sheets. Traders who had piled into risk assets began yanking funds from crypto-linked ETFs — resulting in $593 million in outflows within 24 hours, according to CoinShares data.

These redemptions hit hardest across Bitcoin and Ethereum ETFs, both of which had seen record inflows earlier this month when BTC crossed $112K. Now, those same investors are unwinding positions amid tightening liquidity.

“This is the perfect storm — credit tightening meets leveraged euphoria,” said Adam Turnquist, Chief Strategist at LMAX Digital. “The unwind is brutal because too many traders treated ETFs as cash-equivalent exposure.”

Liquidations Spiral Out of Control

With ETF outflows triggering selling pressure, derivative markets imploded. Data from Coinglass shows more than $19 billion in leveraged longs were wiped out overnight — one of the largest liquidation events since the 2022 Luna collapse.

The cascade started when BTC slipped below the $108K support, triggering algorithmic liquidations that dragged Ethereum and altcoins down in tandem. Within hours, Solana, Avalanche, and Arbitrum saw double-digit losses, with smaller DeFi tokens shedding up to 25%.

The Crypto Fear & Greed Index plunged to 28 (Extreme Fear), signaling broad panic. Funding rates flipped negative across major exchanges — a clear indication that shorts are now paying to hold positions.

“Traders are overexposed, overleveraged, and out of patience,” said Ki Young Ju of CryptoQuant. “We’re seeing forced deleveraging on a scale not seen since March 2020.”

Investor Sentiment: Between Capitulation and Opportunity

Despite the carnage, contrarian voices are beginning to whisper. Historical data suggests that when funding rates dip below –0.05 and the fear index hits the 20s, bottom formations often follow.

“It’s uncomfortable, but this is usually where smart money accumulates,” notes Glassnode’s weekly report. “Exchange reserves are falling again, which often precedes long-term recoveries.”

Still, with Bitcoin teetering near the psychological $100K threshold, the mood is fragile. A break below $99,900 could trigger another $10–15 billion in liquidations. On-chain metrics show a sharp rise in wallets transferring to cold storage — a classic risk-off move.

Macro Backstory: Liquidity Is Drying Up Everywhere

The crypto market isn’t collapsing in isolation. Global equities also took a hit this week as U.S. bond yields hit a 12-month high and the VIX volatility index soared to 28.99. The dollar’s strength has been crushing risk assets worldwide, from tech stocks to emerging-market currencies.

For crypto, which thrives on liquidity and risk appetite, the timing couldn’t be worse. The Federal Reserve’s hawkish tone and China’s stubbornly weak credit growth have tightened global money flows. Even stablecoin issuers are seeing supply contractions for the first time in six months.

“Crypto is now a macro asset. When liquidity shrinks globally, it bleeds first and recovers last,” said Noelle Acheson, author of Crypto Is Macro Now.

Altcoins and DeFi: The Domino Effect

The Altcoin Season Index now sits at 25, its lowest since April — indicating Bitcoin dominance as investors retreat to relative safety. DeFi protocols like Aave, Curve, and Uniswap report 24-hour volume drops of 20–30%, and NFT markets have gone eerily quiet.

Still, innovation hasn’t stopped. Several Web3 projects are pressing forward — Falcon Finance announced its NFT series launch next week, and developers on Bitcoin Ordinals say user activity is still up week-over-week. It’s a strange split screen: markets collapsing while builders keep building.

Policy & Governance: Regulation Tightens Across Markets

Governments are once again tightening their stance as crypto volatility surges.

The European Securities and Markets Authority (ESMA) urged exchanges to strengthen reserve disclosures, while the U.S. SEC reiterated that pending ETF approvals would hinge on “sustainable liquidity.”

These moves underline how regulation and market panic often move in lockstep — whenever prices fall, policymakers step in.

What to Watch Next

• Bitcoin Support Levels: Keep eyes on the $100K zone. A clean break below could trigger fresh liquidations.

• ETF Flows: If outflows reverse by mid-week, that could signal institutional stabilization.

• XRP ETF Decision: The SEC is expected to comment on XRP ETF applications this week — a potential catalyst for altcoin rebound.

• Macro Data: Next week’s U.S. inflation and China credit data will likely set the tone for risk assets.

Earlier this week, Bitcoin briefly rebounded above $115K after a similar $19B liquidation event — a reminder that even deep sell-offs can flip fast. Read full story here.

The Bottom Line

The October 18 crash marks a sobering reminder that crypto’s maturity hasn’t erased its vulnerability to macro forces. Bitcoin’s dip below $106K is less about technology and more about liquidity psychology. Markets move on fear and flow — and right now, both are draining fast.

But history shows these moments don’t last forever. Every crypto winter has eventually given birth to a new bull cycle. Whether this is that moment will depend on one thing — who has the conviction to buy when everyone else is running for the exits.

See all our insights: Bitcoin World News