The cryptocurrency market experienced its largest leveraged sell-off in history last weekend, but according to Bitwise chief investment officer Matt Hougan, the upheaval is not expected to have lasting repercussions.
In a blog post on Tuesday, Hougan characterized the steep decline as “a blip” rather than a significant issue. He noted that the crypto sector “received a passing grade” in managing the downturn.
“Numerous DeFi platforms operated seamlessly: Uniswap, Hyperliquid, Aave, and others reported no losses,” he stated, while pointing out that Binance and some other exchanges encountered difficulties. “Overall, the crypto space performed comparably, if not better, than traditional markets would have under similar circumstances,” he added.
The decline followed US President Donald Trump’s announcement of potential 100% tariffs on Chinese imports, igniting fears of a trade conflict. Bitcoin (BTC) dropped nearly 15%, with altcoins like Solana (SOL) falling by as much as 40%. About $20 billion in leveraged positions were liquidated.
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Impact was “contained”
By Monday, Bitcoin had rebounded to approximately $115,000, nearly reversing the losses from the weekend. Hougan remarked that the swift recovery demonstrates the resilience of blockchain infrastructure. “The impact was limited to individual investors,” he noted, adding that no significant institutions were affected by the event.
The Bitwise executive attributed the sell-off primarily to highly leveraged traders rather than fundamental changes. He asserted that key factors related to crypto—including technology, security, and regulatory conditions—remained unchanged.
“In the long run,” Hougan concluded, “I believe the market will stabilize and refocus on the fundamentals of crypto. When that occurs, I expect the bull market to persist.”
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Mixed opinions on unprecedented crypto liquidation
Meanwhile, analysts remain divided regarding the record liquidation in the crypto market on Friday. Some have alleged that major market makers orchestrated a coordinated sell-off, while others attribute it to a natural deleveraging process.
The sudden crash caused open interest in perpetual futures to drop from $26 billion to under $14 billion, whereas trading volume on decentralized exchanges (DEX) soared past $177 billion, with crypto lending fees reaching a historic high of $20 million.
Analysts at CryptoQuant indicated that the data pointed towards an orderly market adjustment rather than a panic-induced collapse. Of the $14 billion reduction in open interest, approximately 93% represented controlled deleveraging, with only $1 billion in Bitcoin longs liquidated.
However, some analysts have attributed the severity of the crash to liquidity withdrawals by market makers. Blockchain investigator YQ noted that liquidity began to dwindle from order books about an hour after Trump’s tariff announcement, resulting in a “liquidity vacuum” that saw market depth decrease by 98% before prices reached their lowest point.
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