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Liquidity Pressures Drive Deep Crypto Selloff in October 2025

Liquidity Pressures Drive Deep Crypto Selloff in October 2025

CointurkCointurk2026/02/20 15:42
By:Cointurk

A dramatic downturn rocked the cryptocurrency markets in October 2025, but according to analyst Benjamin Cowen, this correction wasn’t triggered by a single event. Cowen, CEO of Into The Cryptoverse and a prominent figure in crypto research since 2019, argues that deep-rooted, structural pressures lying beneath the surface for years finally converged. He points to persistently tight global liquidity, market contraction, and the maturity phase of the current Bitcoin cycle—all factors that combined to expose lingering market weaknesses in swift fashion.

The Impact of Tight Liquidity on Crypto Markets

Drawing on his company’s Liquidity Risk Measurement Tool, Cowen explains that the easy-money era of 2020–2021 has given way to several years of stringent financial conditions. Notably, the market rally observed in 2024 and 2025 took place under these restrictive circumstances, rather than the accommodative climate witnessed in previous upswings.

Where abundant liquidity once fueled broad-based rallies across crypto assets, recent capital flows have been concentrated into just a handful of tokens. Cowen likens the present market climate to 2018 and 2019, when liquidity tightened prematurely and Bitcoin peaked even as monetary policies remained restrictive. He underscores that this pattern of capital scarcity challenged the market’s resilience then, just as it does now.

Similar trends in global net liquidity have been observed across both periods. Bitcoin managed to retain value and even appreciate modestly in these conditions; yet, altcoins failed to join in, as pervasive rallies across the sector remained elusive amid continued financial constraints.

Declining Participation and Internal Market Weakness

Cowen points to the Advance Decline Index—which tracks the top 100 cryptocurrencies—highlighting its steady downward trajectory since 2021. This signals that recent price increases have been driven by a shrinking number of digital assets, with fewer coins participating in the market’s ascent.

Social media chatter and retail participation, which reached fever pitch during the rallies of 2017 and 2021, have notably lagged in the most recent cycle. Observers stress that individual investor engagement fell well short of previous peaks, contributing to the muted performance outside Bitcoin.

With liquidity remaining tight and new demand in short supply, investors disproportionately favored Bitcoin, further boosting its dominance. Altcoins, by contrast, have struggled to gather momentum. Once Bitcoin reached its peak in October, this concentration effect diminished, exposing vulnerabilities and leading to sharp declines in many altcoins. Cowen maintains that the downturn did not create new weaknesses, but simply revealed risks that had quietly accumulated over the years.

Sentiment Plumbs Record Lows

By February 2026, market sentiment among cryptocurrency participants had reached historic lows. According to analysts at Matrixport, a financial services firm specializing in digital assets, the prolonged wave of selling pressure may be establishing the groundwork for a lasting bottom formation in the months ahead.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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