Friday’s unprecedented $19 billion crypto market liquidation event has led to mixed reactions among traders, with some accusing market makers of orchestrating a coordinated sell-off, while analysts pointed to a natural deleveraging cycle.
The flash crash on Friday saw open interest for perpetual futures on decentralized exchanges (DEXs) plunge from $26 billion to below $14 billion, according to DefiLlama.
On Friday, fees for crypto lending protocols skyrocketed past $20 million, marking the highest daily total ever, while weekly DEX volumes exceeded $177 billion. Total borrowing across lending platforms also fell below $60 billion for the first time since August.
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Some analysts see organic market reset
Despite numerous traders attributing a coordinated correction to platform glitches and significant market participants, blockchain data indicated that most of the record liquidation was organic.
During Friday’s downturn, open interest declined by $14 billion, but at least 93% of this reduction was due to “controlled deleveraging, not a cascade,” according to Axel Adler Jr, an analyst at blockchain data platform CryptoQuant.
Of the $14 billion, only $1 billion in long Bitcoin (BTC) positions were liquidated, which Adler noted as a “very mature moment for Bitcoin” in a Tuesday X post.
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However, not everyone is convinced the event was entirely mechanical. Several market observers have accused major market makers of contributing to the drop by withdrawing liquidity from exchanges at critical junctures.
According to blockchain investigator YQ, market makers allegedly created a “liquidity vacuum” that worsened the downturn.
Liquidity withdrawals started at 9:00 pm UTC on Friday, roughly an hour after US President Donald Trump’s tariff threat.
By 9:20 pm UTC, most tokens reached their lows, while market depth on tracked tokens collapsed to just $27,000, representing a 98% drop, according to YQ in a Monday X post.
Blockchain data platform Coinwatch also noted the 98% market depth drop on Binance, the largest cryptocurrency exchange.
“When the token price crashed, both MMs removed everything from the order books. 1.5 hours later, Blue activated their bots again, restoring similar liquidity levels as before. Meanwhile, Turquoise is still barely represented in the books,” Coinwatch stated in a Sunday X post.
In relation to another unidentified Binance-listed token exceeding $5 billion, two out of three market makers “abandoned their duties for 5 hours.”
Coinwatch indicated that discussions are ongoing with the two market makers to “facilitate their return to the order books.”
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