Crypto Markets Enter Q3 With Less Leverage, Thinner Liquidity After Q2 Liquidations

Cryptocurrency markets entered the third quarter of 2026 with less leverage but thinner liquidity after a wave of liquidations cleared speculative positions while major sources of demand weakened during the second quarter.

According to a market update from institutional data provider Talos, Bitcoin (BTC) and Ether (ETH) long liquidations totaled $8.35 billion in Q2. The data provider pointed out that the deleveraging coincided with spot Bitcoin exchange-traded fund (ETF) outflows, reduced Bitcoin buying by Strategy and a contraction in stablecoin supply.

While the reset left the market more stable heading into Q3, Talos said reduced order-book depth weakened its ability to absorb renewed selling pressure. This means the market could be less vulnerable to a chain reaction of forced selling, but prices may still swing sharply because there's less trading activity to absorb large orders.

Cross-asset performance chart. Source: Talos

At last look on Wednesday, Bitcoin was trading hands at $58.656, after trading earlier in the day to $57,742, its lowest price since Sept. 17, 2024.

Talos said the liquidation wave reduced the amount of leveraged money in the market. Bitcoin open interest, which measures the value of outstanding derivatives contracts, fell to $33.5 billion, down 32% from its Q2 peak, while Ether open interest dropped to $16.2 billion, a 40% decline, according to the data provider.

Related: Swan's Cory Klippsten sees record Bitcoin holder supply revealing early bottom

To be sure, the market became less liquid: Bitcoin’s 2% order-book depth, the value of buy and sell orders close to its market price, fell to between $35 and $40 million by late June from about $70 million in early May. Spot exchange volume also declined 28% quarter-over-quarter to $2.32 trillion, according to Talos.

ETF outflows and Strategy slowdown weigh on demand

Weakening demand was evident before the end of Q2. US spot Bitcoin ETFs recorded $696.3 million in net outflows in a single day on June 25. In total, June recorded about $4.5 billion in outflows, pushing year-to-date totals to $5.5 billion.

Strategy also purchased roughly 3,600 BTC in June, down from about 25,000 BTC in May and more than 50,000 BTC in April, according to company disclosures. The company also recorded a net sale of 32 BTC earlier in June and ended the month with 847,363 Bitcoin in its treasury, purchased at an average price of $64,103 apiece.