Bitcoin has fallen from $124,000 to below $115,000, leading to over $1 billion in liquidations in the crypto derivatives market, marking the largest scale of long liquidations since early August this year.

Liquidity stress is evident: USDC financing costs are rising, with over-the-counter (OTC) USDC lending costs continuously increasing since July, while on-chain lending rates remain stable. The spread between the two has widened to the highest level since the end of 2024, indicating that off-chain dollar demand far exceeds on-chain liquidity.

ETH lending costs are rising: In July, Aave experienced a wave of withdrawals, pushing Ethereum lending rates above Ethereum staking yields, disrupting the popular 'circular leverage' strategy (using staked ETH as collateral to borrow more ETH). This resulted in a rapid exit from staking positions, causing the exit queue for the Ethereum beacon chain to set a record of 13 days!