The crypto market is currently experiencing its most severe liquidity stress test since the end of 2022, with more than $1 trillion of value lost in the last month.
While the headline volatility is concentrated in Bitcoin, the structural damage has also penetrated deeper into large assets such as XRP and Ethereum.
These simultaneous failures are not isolated incidents. These represent simultaneous liquidity shocks that force risk repricing across the digital asset ecosystem.
Bitcoin liquidity outflow and ETF reversal
Market downturns began as gradual price corrections but rapidly accelerated into liquidity events driven by specific market cohorts.
According to CheckOnChain data, traders locked in losses of $1 billion on November 21st alone. This number ranks among the highest loss realization days of the year.
The data shows that the selling pressure was mainly driven by holders of the coin less than three months after its issuance. These participants are statistically the most sensitive to volatility and often enter the market near the local top.
As a result, they are usually the first to exit if price movements become unfavorable.
Glassnode data further supports this, showing that Bitcoin’s short-term holder P&L has collapsed to levels last observed at the depths of the 2022 bear market. This indicator shows that a recent group of buyers has been aggressively selling on weakness.
In fact, this market movement reflects the classic late-stage fear that usually defines a significant drawdown.
But unlike the 2022 crash, which was caused by credit contagion and currency collapse, the current crash is caused by depletion of marginal demand and mechanical unwinding of leverage.
In fact, CryptoQuant data shows that there is no significant whale activity in the current market.
Moreover, this on-chain surrender coincided with a sharp reversal in the flow of institutions.
The U.S. spot Bitcoin ETF, which briefly broke its five-day redemption record earlier this week due to modest inflows, has faced fresh selling pressure.
These products recorded $903 million in outflows on November 20, according to Coinperps data. This single-day figure is the highest this month and ranks among the most significant since the product’s launch in January 2024.
Separately, the scale of these redemptions has wiped out capital inflows from previous relief rallies.
As a result, November is on track to be the worst month in history for ETF redemptions. The total amount of outflows was $3.79 billion, already exceeding the record set in February.
This cumulative effect resulted in a significant liquidity shock.
Bitcoin ETF assets under management are currently down $3.98 billion from their all-time high. This marks the second-largest drawdown in the short history of these investment vehicles.
As a result, these funds are forced to sell their underlying assets to meet redemption demands, adding sell-side pressure to a spot market already struggling to absorb supply from panicked short-term holders.
XRP capitulation and collapse of profitability
While Bitcoin is the source of volatility, XRP has emerged as a barometer of the secondary effects of liquidity crunch.
XRP has historically decoupled from Bitcoin during certain periods of volatility, but in this case its losses are closely tracking the market leader.
XRP has fallen nearly 9% in the past 24 hours, falling below $2 for the first time since April as Bitcoin prices fall toward $80,000.
This accelerated the downtrend that was building at a fundamental level as liquidity flowed out of the altcoin market.
According to Glassnode, XRP realized losses at the 30D-EMA (30-day exponential moving average) jumped to $75 million per day. The last time we saw realized losses of this magnitude was in April 2025.
This indicator confirms that capitulation is no longer limited to Bitcoin tourism investors, but is extending to major altcoin holders. Investors are choosing to lock in losses rather than sustain volatility. This suggests a loss of confidence in short-term price recovery.
Because of this, the capitulation had a severe impact on the profitability profile of the XRP network. According to on-chain data, only 58.5% of the circulating XRP supply is profitable. This is the lowest value since November 2024, when the token was trading near $0.53.
As a result, approximately 41.5% of all XRP in circulation has unrealized losses. This equates to approximately 26.5 billion tokens held by investors whose positions are underwater.
This high percentage of supply loss creates indirect resistance to potential price recovery. When prices try to rebound, underwater holders often try to exit their positions at break-even levels. This creates a steady stream of selling pressure that dampens any upside momentum.
Notably, the current decline comes despite the community’s enthusiasm for the newly launched XRP ETF.
Therefore, this data suggests that macro liquidity constraints and pressure from Bitcoin’s decline are completely overshadowing any potential bullish story inherent in the XRP ecosystem.
structural vulnerability
The speed and severity of XRP losses can be attributed to structural differences between XRP and Bitcoin.
XRP lacks the deep spot liquidity of institutional investors and the significant bidding from ETF inflows that sometimes cushion Bitcoin during periods of high volatility. The order book for XRP is generally thin. This will cause large sell flows to further disrupt price stability.
Additionally, the asset has a more dispersed retail holder base compared to the increasingly institutionalized Bitcoin market. Individual investors are typically more sensitive to price fluctuations and are more prone to panic selling during market-wide corrections.
Technical indicators reflect this structural weakness. The token recently formed a “death cross” where the price fell below both the 50-day and 200-day moving averages.
This technical formation is widely seen by traders as a signal of momentum depletion and often precedes a period of sustained selling pressure. This serves as a confirmation for algorithmic traders and technical analysts to change positions to lower levels.
However, the main factor remains broad market trends.
When Bitcoin experiences liquidity events caused by ETF outflows or short-term holders capitulating, altcoins act as shock absorbers for the system. These tend to amplify volatility rather than dampen it.
During these stages, Bitcoin liquidity will not be converted into altcoins. Instead, withdraw from the crypto economy altogether and settle for fiat currencies or stablecoins. This makes assets like XRP vulnerable to a second wave of panic selling.
market outlook
The current market structure is characterized by harmful feedback loops.
Falling Bitcoin prices will cause an increase in ETF outflows. These outflows necessitate spot selling by fund issuers, forcing prices to fall. Falling prices create panic among short-term holders, who sell into an illiquid market.
As overall market liquidity declines, altcoins like XRP will suffer greater losses due to thinner order books. This deterioration in sentiment will once again trigger ETF redemptions.
This cyclical dynamic explains why XRP losses are accelerating despite the lack of asset-specific negative news. The factors are global, not individual.
Although market participants are primarily focused on Bitcoin as a signal, a spike in XRP’s real losses serves as a sign of deepening market vulnerabilities. This vulnerability is rooted in structural liquidity constraints and the composition of the current investor base.
Bitcoin’s stability will therefore depend on its ability to absorb selling pressure from ETFs and rebuild confidence among short-term holders.
Assets with weak liquidity profiles will continue to be exposed to downside risk until the feedback loop is broken as outflows ease or spot demand recovers.
XRP serves as an important indicator in this environment. If the profitability indicators stabilize, it could indicate that the market has cleared out most of the weak hands. However, if losses continue to increase, it would suggest that the liquidity crunch has not bottomed out yet.