Regulatory uncertainty added another layer of pressure. The U.S. Senate shelved the closely watched CLARITY Act to prioritize a Russia sanctions bill, making a vote on the crypto legislation unlikely before next week. With the August 8 recess approaching, the delay leaves only a narrow window for action on a bill that had been touted as a potential catalyst for institutional adoption.
The derivatives market had been flashing warning signs for days. Funding rates across major exchanges had climbed, signaling aggressive long positioning that was becoming expensive to maintain. Bitcoin’s open interest had jumped 12.2% in a single day to $15.9 billion, the largest one-day build in the dataset, while funding sat at an annualized 7.06%. Ethereum funding had reached its most stretched level in recent history, with an annualized rate of 7.77% and sustained long accumulation. When prices turned, the unwind was swift and brutal.
The liquidation cascade also rippled through decentralized derivatives markets. On Hyperliquid, a futures product tracking SK Hynix shares briefly crashed to $927—far below the underlying stock’s price—after a wave of long liquidations overwhelmed the order book. The price recovered within two minutes, but the incident highlighted the thin liquidity and cascade risks that can emerge on decentralized platforms during periods of high volatility.