Friday’s staggering $19 billion crypto market liquidation event has polarized traders, with accusations of a coordinated sell-off by market makers circulating, while analysts suggest it reflects a natural cycle of deleveraging.
The rapid crash on Friday saw open interest for perpetual futures on decentralized exchanges (DEXs) plummet from $26 billion to below $14 billion, according to DefiLlama.
Crypto lending protocol fees soared past $20 million on Friday, marking the highest daily total recorded, while weekly DEX volumes increased to over $177 billion. The total borrowed 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 pointing to a coordinated correction driven by platform glitches and large participants, blockchain data indicates that most of the record liquidation was organic.
During Friday’s crash, open interest experienced a $14 billion decline, but at least 93% of this decrease was due to “controlled deleveraging, not a cascade,” according to Axel Adler Jr, an analyst at the blockchain data platform CryptoQuant.
Out of the $14 billion, only $1 billion worth of long Bitcoin (BTC) positions were liquidated, indicating a “very mature moment for Bitcoin,” Adler noted in a Tuesday X post.
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However, skepticism remains regarding the purely mechanical nature of the event. Several market observers allege that major market makers contributed to the collapse by withdrawing liquidity from exchanges at critical times.
Order book data suggests that market makers allegedly created a “liquidity vacuum” that intensified the correction, according to blockchain analyst YQ.
Liquidity withdrawals from market makers began at 9:00 pm UTC on Friday, shortly after President Donald Trump’s tariff threat.
By 9:20 pm UTC, most tokens had bottomed out, while market depth for tracked tokens dropped to just $27,000, a staggering 98% decrease, YQ mentioned in a Monday X post.
The blockchain data platform Coinwatch also highlighted the 98% market depth crash on Binance, the largest cryptocurrency exchange globally.
“When the token price crashed, both market makers withdrew all liquidity. 1.5 hours later, Blue resumed their liquidity provision, while Turquoise is present but with minimal impact,” Coinwatch stated in a Sunday X post.
In examining another unnamed Binance-listed token valued at over $5 billion, it was observed that two out of three market makers “neglected their responsibilities for 5 hours.”
Coinwatch also reported ongoing discussions with the two market makers to “facilitate their reintegration into the order books.”
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