Friday’s unprecedented $19 billion liquidation event in the crypto market has created a split among traders, with some blaming market makers for a coordinated sell-off, while others suggest a natural process of deleveraging.
This flash crash resulted in open interest for perpetual futures on decentralized exchanges (DEXs) plummeting from $26 billion to under $14 billion, as reported by DefiLlama.
On Friday, fees on crypto lending protocols surged past $20 million, reaching the highest daily total ever recorded, while weekly DEX volumes soared beyond $177 billion. Additionally, the total borrowed across lending platforms fell below $60 billion for the first time since August.
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Some analysts see organic market reset
Despite various traders attributing the correction to coordinated actions influenced by platform glitches and significant market players, blockchain data indicates that the majority of the record liquidation was organic.
During Friday’s crash, open interest saw a $14 billion drop, yet at least 93% of this fall was described as a “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, which Adler characterized as a “very mature moment for Bitcoin,” in a post on Tuesday X.
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However, not everyone believes the event was entirely mechanical. Several market analysts have accused major market makers of exacerbating the collapse by withdrawing liquidity from exchanges at crucial moments.
According to order book data, market makers purportedly created a “liquidity vacuum” that made the correction worse, as noted by blockchain investigator YQ.
Market makers began pulling liquidity at 9:00 pm UTC on Friday, shortly after US President Donald Trump’s tariff warnings.
By 9:20 pm UTC, most tokens hit their lowest points, and market depth on tracked tokens plunged to just $27,000—a staggering 98% drop, according to a post from YQ on Monday X.
The blockchain data platform Coinwatch also emphasized the 98% market depth decline on Binance, the largest cryptocurrency exchange globally.
“When the token price collapsed, both MMs withdrew all their liquidity. An hour and a half later, Blue reactivated their bots, returning to provide similar liquidity levels as before. Meanwhile, Turquoise is still in the books, but only minimally,” Coinwatch noted in a Sunday X post.
In examining another unidentified Binance-listed token valued at over $5 billion, two out of three market makers “abandoned their responsibilities for 5 hours.”
Coinwatch also stated it is in talks with the two market makers to facilitate their return to the order books.
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