Toncoin (TON) has managed to recoup some of its earlier losses following a significant nearly five-hour downtime of its blockchain. This downtime has been partially attributed to the heightened interest in the DOGS airdrop, a strategic initiative by the Ton Foundation to draw attention to what they perceive as the unjust arrest of Pavel Durov. Despite this setback, it was not entirely a dismal day for TON.

During the East Asia trading session, TON mitigated some of its losses and now stands at less than a 1% drop, according to CoinDesk Indices data. In stark contrast, the CoinDesk 20 (CD20), which tracks the largest and most liquid digital assets, has declined by over 6.5%. This drop in CD20 is primarily driven by a bitcoin (BTC)-led market slump that resulted in more than $300 million in crypto futures liquidations, marking the highest since August 5.

Bitcoin (BTC) experienced a 6% decline, with other major cryptocurrencies such as ether (ETH), Solana’s SOL, Cardano’s ADA, and dogecoin (DOGE) each falling over 5%. XRP demonstrated relative resilience with a 3.4% drop, while Tron’s TRX outperformed other major assets with only a 2% decline.

Futures for ether saw the highest liquidations, amounting to $102 million, followed by bitcoin futures at $96 million, and various smaller alternative tokens collectively reaching $40 million in liquidations.

These rapid liquidations likely induced a long squeeze, a scenario where traders who bet on rising prices are compelled to sell into a declining market to limit their losses, thereby amplifying the downturn. According to CoinGlass data, open interest in bitcoin futures has decreased from $34 billion on Monday to $31 billion, indicating diminishing confidence among traders. Open interest represents the number of unsettled futures contracts and provides insight into whether new capital is entering or leaving the market.

The sell-off coincided with U.S.-listed bitcoin exchange-traded funds (ETFs) experiencing over $127 million in net outflows on Tuesday, ending an eight-day streak of inflows. Similarly, ether ETFs saw their ninth consecutive day of outflows, with more than $3.45 million exiting these products.

“BTC ETFs faced substantial outflows amounting to $127 million as traders appeared to be taking profits following the Jackson Hole rally,” explained Augustine Fan, head of insights at SOFA, an on-chain financial products provider. “Conversely, ETH continued its downward trend with nine straight days of outflows as the Ethereum mainnet grapples with an identity crisis,” he added via Telegram.

Additionally, short-dated volatility surged as traders sought downside protection through puts, reflecting the poor underlying momentum caused by supply overhang and a lack of imminent on-chain catalysts.

AI-related tokens also faced significant declines despite Nvidia’s potential for strong earnings driving some investors towards AI tokens. Specifically, NEAR fell by 10%, ICP by 6.5%, FET by 11.8%, Bittensor’s TAO by 11.3%, and RENDER (RNDR) dropped by 9.5%, according to CoinDesk Indices data.

“Sentiment around AI has notably shifted,” noted Katie Stockton, founder and Managing Partner at Fairlead Strategies during an interview on CoinDesk TV. “Despite Nvidia’s recovery post-pullback, its upcoming earnings report holds considerable influence. This could either propel the market higher before a possible September correction or trigger that correction itself,” she elaborated. “We anticipate that Nvidia and other mega caps will enter a more range-bound environment amidst increased volatility, irrespective of their AI exposure,” she concluded.

In other news, Hex Trust, a Hong Kong-based custodian, announced the launch of a staking partner program aimed at providing clients with expanded access to staking services. This move signals ongoing institutional interest in the digital asset sector.