- Over $20B in value vanished during what Bitwise called crypto’s worst liquidation event.
- Bitcoin fell 13% in one hour while ATOM briefly crashed to near zero on some venues.
- Around $65B in open interest was erased, resetting exposure to July levels.
- DeFi platforms stayed stable as lending protocols held firm with blue-chip collateral.
The cryptocurrency market experienced one of its harshest sell-offs on Friday, wiping out over $20 billion in value within hours. Bitwise portfolio manager Jonathan Man described it as the worst liquidation event in crypto history, triggered by vanishing liquidity and widespread forced deleveraging across trading platforms.
Widespread Liquidations and Market Breakdown
Jonathan Man, portfolio manager at Bitwise’s Multi-Strategy Alpha Fund, said Bitcoin dropped 13% from peak to trough in just one hour. Long-tail altcoins suffered heavier losses, with Cosmos’s ATOM “falling to virtually zero” on some platforms before recovering.
He estimated that about $65 billion in open interest was erased during the crash. The reduction reset leveraged positions to levels last seen in July. According to Man, the scale of losses mattered less than the structural strain that appeared when liquidity providers withdrew. As uncertainty spiked, market makers widened spreads or paused trading, forcing exchanges to use emergency tools to maintain solvency.
Man explained that perpetual futures, or “perps,” use a shared margin pool. When losses exceed available collateral, exchanges rebalance by triggering forced closures through auto-deleveraging. This process stabilizes the books but can also close profitable trades to protect the system.
Centralized Exchanges Under Strain
Man reported that centralized exchanges saw the most pressure as liquidity disappeared and order books thinned. Smaller tokens, heavily dependent on active market makers, dropped sharply once liquidity providers reduced exposure. He said some venues had to reallocate exposure quickly to maintain balanced positions.
He described auto-deleveraging events at certain exchanges, where profitable positions were forcibly closed to offset losses from traders unable to cover margins. He also mentioned liquidity vaults such as Hyperliquid’s HLP, which absorbed distressed trades and turned profitable by buying discounted assets during the turmoil.
DeFi Markets Showed Greater Stability
Man said decentralized finance (DeFi) platforms were comparatively stable. Lending protocols like Aave and Morpho largely accepted Bitcoin and Ethereum as collateral, which prevented liquidation cascades. He added that the USDe stablecoin remained solvent within DeFi as its price was “hardcoded to $1,” limiting market contagion.
However, he noted that USDe traded near $0.65 on centralized exchanges due to thin liquidity, exposing users who used it as margin to liquidation risks. Despite this, DeFi lending markets avoided broader instability seen in centralized venues.
Aftermath and Market Recovery
Man said that although price spreads reached over $300 between Binance and Hyperliquid on ETH-USD pairs, markets began to recover by the weekend. Traders with available capital took advantage of the dislocation.
He noted that open interest levels had reset sharply lower, leaving the market on firmer footing than before the crash. Man concluded that while Friday’s event revealed structural stress points, it also flushed out excessive leverage, paving the way for more balanced market conditions in the coming week.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
