The abrupt market downturn on Friday, which led to significant declines in some cryptocurrencies—by as much as 95% within a single day—does not indicate a long-term bearish trend or weakened fundamentals, according to investment analysts from The Kobeissi Letter.
This market collapse was prompted by a combination of short-term factors, including “excessive leverage and risk,” alongside US President Donald Trump’s announcement of 100% tariffs on China, the analysts noted.
The Kobeissi Letter highlighted the market’s heavy long bias, with $16.7 billion in long positions liquidated compared to only $2.5 billion in short positions, yielding a ratio of nearly 7:1.
Additionally, the Trump announcement was made around 5 PM on Friday when market liquidity was low, creating a conducive environment for increased price volatility and significant price swings. The Kobeissi Letter remarked:
“We believe this crash was due to the combination of multiple sudden technical factors. It does not have long-term fundamental implications. A technical correction was overdue; we think a trade deal will be reached, and crypto remains strong. We are bullish.”
Friday’s crypto market crash triggered a $20 billion wave of liquidations, affecting nearly 1.6 million traders within 24 hours—surpassing previous crises, including the FTX exchange collapse and the Terra/LUNA incident.
Related: Crypto sentiment shifts to ‘Fear’ as Bitcoin crashes following Trump’s tariffs
Analysts caution about the short term as leveraged traders exit the markets
Investors and traders in Bitcoin (BTC) should brace for price fluctuations in the short term as the markets adjust to the Trump tariff announcement and its macroeconomic impact, asserts Cory Klippsten, CEO of Bitcoin services firm Swan Bitcoin.
The market drop will “wash out leveraged traders and weak hands,” and consolidate in a way that will set the stage for the next rally to new heights, Klippsten informed Cointelegraph.
Other analysts and traders suggest that the $20 billion in crypto liquidations may represent merely the tip of the iceberg, with reported losses being only a small fraction of the actual financial impact on the markets and participants.
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