According to investment analysts at The Kobeissi Letter, the abrupt market crash on Friday, which saw some cryptocurrencies plunge by up to 95% in less than 24 hours, does not indicate a prolonged bearish trend or weakening fundamentals.
The market turmoil was spurred by a confluence of short-term elements, 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 strong long bias, with $16.7 billion in long positions being liquidated against just $2.5 billion in short positions, resulting in a nearly 7:1 ratio.
Additionally, Trump’s announcement occurred around 5 PM on Friday, a time of thin market liquidity, which created a conducive environment for increased price volatility and significant price swings. The Kobeissi Letter further commented:
“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.”
The crypto market’s crash on Friday instigated a $20 billion wave of liquidations, forcing nearly 1.6 million traders out of their positions within a single day, surpassing previous crises, including the failures of the FTX exchange and the Terra/LUNA ecosystem.
Related: Crypto sentiment flips to ‘Fear’ as Bitcoin plunges after Trump’s tariffs
Analysts caution on short-term volatility as leveraged traders exit the markets
Bitcoin (BTC) investors and traders should brace for price fluctuations in the short term as the markets respond to the Trump tariff announcement and its macroeconomic implications, according to Cory Klippsten, CEO of Bitcoin services firm Swan Bitcoin.
The market downturn will “wash out leveraged traders and weak hands,” consolidating to fuel the next rally towards new highs, Klippsten shared with Cointelegraph.
Other analysts and traders indicate that the $20 billion in crypto liquidations is just the beginning, with reported losses representing only a portion of the actual financial impact on the markets and participants.
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