On October 31, 2025, the cryptocurrency market experienced a notable downturn, with a 2.0% contraction reducing its global market capitalization to $3.69 trillion. The sell-off was particularly sharp in the artificial intelligence (AI) sector, and Ethereum fell below a key psychological level, raising concerns about potential liquidations in an over-leveraged market.
Ethereum Leads the Decline
Ether (ETH) was a standout underperformer in the downturn. On the day, its price fell over 3% to trade around $3,815, underperforming Bitcoin, which saw a decrease of nearly 2% to approximately $108,820. This extended a trend of relative weakness for ETH; earlier in the month, a 7% plunge had led a broader market sell-off, resulting in hundreds of millions of dollars in liquidations.
Analysts from 10x Research noted that the outlook for Ether appears weak due to factors like fading demand from major institutional buyers and a growing preference among traders for Bitcoin options over those of Ethereum. This sentiment was reflected in the market, where ETH broke below critical support levels, putting significant leveraged positions at risk.
A Perfect Storm of Selling Pressure
The correction was not triggered by a single event but by a combination of several bearish factors. The sell-off in AI-related tokens, which had enjoyed a strong bullish period, was a major contributor. This sector-specific weakness resonated with resurfacing warnings from industry figures like Sam Altman about a potential “AI bubble”, which dampened market sentiment during the session.
Additional selling pressure came from negative flows out of spot ETFs and scheduled token unlocks from projects like LayerZero, Plasma, and Soon, which increased the circulating supply on the market. Statements from the Federal Reserve and the occurrence of large options expirations acted as catalysts, injecting heightened volatility into an already nervous market.
Trader’s Focus: Navigating Key Levels
For traders and treasury managers, the immediate focus is on risk management. The high leverage in the system means that specific price levels for Ethereum are critical. The market is closely watching the $3,900 level; a sustained move above this could force the liquidation of approximately $536 million in short positions. Conversely, a drop below $3,700 would put around $959 million in long positions at risk.
The speed of the capital outflow highlighted the market’s fragility, with billions of dollars in market value evaporating in a short time. In this environment, monitoring open interest and exposure around derivatives expirations becomes a top priority to avoid being caught in a liquidation cascade that could amplify losses.
