The crypto markets faced a tough day on Monday. They saw a whopping $770 million in bullish liquidations. This figure is close to the monthly highs we saw on January 18.

Major cryptocurrencies like Solana (SOL) and Dogecoin (DOGE) took a hit, dropping over 10%. They led the losses among the big players. Other cryptocurrencies, including Ether (ETH), BNB Chain’s BNB, XRP (XRP), and Cardano (ADA), fell by as much as 9%. Overall, the market cap dropped by 8.5% during the Asian afternoon.

Even tokens outside the top twenty struggled. Memecoin PEPE, the new layer 1 token Aptos (APT), Gate.io’s GATE, and the AI platform Virtuals (VIRTUALS) lost up to 18%. However, Jupiter (JUP) was the only token to gain, rising by 3.5%. This increase came after they announced plans to buy back tokens from the open market, which could lead to significant buying volumes over the year.

Bitcoin slid under $99,000 early Monday. Traders were taking profits ahead of the first U.S. Federal Open Market Committee (FOMC) meeting of the year. This decline mirrored losses in U.S. stock futures. Traders were reacting to information about the capabilities of a Chinese company called DeepSeek, which challenged some narratives in the market.

Futures markets reflected these losses as well. Traders of BTC-tracked products lost $238 million in just 24 hours, mostly during early European and Asian trading hours. SOL and DOGE bets alone lost $50 million. Altcoin-tracked products saw losses of $138 million, while ether-tracked futures lost $84 million.

The largest single liquidation order occurred on HTX, involving a tether-margined BTC trade worth $98.4 million. Liquidation happens when a trader doesn’t have enough funds to maintain a leveraged position. Given the crypto market's volatility, liquidations are common. However, significant events like Monday’s can provide insights into market sentiment.

Liquidations can signal an overstretched market, indicating that a price correction might be underway. Areas on price charts with high liquidation volumes might serve as support or resistance levels. This is where prices could reverse due to a lack of selling pressure from liquidated positions.

But if the market keeps declining, traders with short positions might see this as a sign to increase their bets. On the flip side, contrarian traders could view heavy liquidation as a buying opportunity, hoping for a price recovery once the selling pressure eases.