Cryptocurrency markets entered the third quarter of 2026 less leveraged but with less liquidity after a wave of liquidations cleared speculative positions and underlying sources of demand weakened in the second quarter.
According to before a market update from institutional data provider Talos, long liquidations of Bitcoin (BTC) and Ether (ETH) totaled $8.35 billion in Q2. The data provider noted that the deleveraging coincided with outflows from bitcoin exchange-traded funds (ETFs), a reduction in Strategy bitcoin purchases and a reduction in the supply of stablecoins.
While the reset left the market more stable in the third quarter, Talos said the reduced depth of the order book weakened its ability to absorb new selling pressure. This means that the market may be less vulnerable to a chain reaction of forced selling, but prices can still fluctuate wildly because there is less trading activity to absorb large orders.
Performance chart of various assets. Source: Talos
Talos said the wave of liquidations has reduced the amount of money in debt funds on the market. Bitcoin open interest, which measures the value of outstanding derivatives contracts, fell to $33.5 billion, down 32% from its peak in Q2, while ether open interest fell 40% to $16.2 billion, according to the data provider.
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Certainly, the market has become less liquid, with the 2% depth of Bitcoin’s order book, the value of buy and sell orders close to the market price, falling to $35-40 million by the end of June from around $70 million in early May. Spot trading also fell 28% quarter-on-quarter to $2.32 trillion, according to Talos.
ETF outflows and Strategy slowdowns depend on demand
The weakening of demand became evident even before the end of the 2nd quarter. Spot Bitcoin ETFs in the US recorded a net outflow of $696.3 million in one day, June 25. Total June around $4.5 billion in outflows were recordedbringing the year-to-date total to $5.5 billion.
Strategy also acquired approximately 3,600 BTC in June, up from approximately 25,000 BTC in May and more than 50,000 BTC in April, according to the company. Company too previously recorded a net sale of 32 BTC in June and ended the month with 847,363 bitcoins in its treasury, purchased at an average price of $64,103 apiece. At last glance on Wednesday, the largest crypto was trading at $58,656.
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