The abrupt market collapse on Friday, which saw some cryptocurrencies plummet by up to 95% in less than 24 hours, does not indicate a long-term bearish trend or weakening fundamentals, according to investment analysts at The Kobeissi Letter.
Friday’s downturn was ignited by a confluence of short-term factors, including “excessive leverage and risk,” along with US President Donald Trump’s announcement of 100% tariffs on China, the analysts noted.
The Kobeissi Letter highlighted the market’s significant long bias, with $16.7 billion in long positions liquidated compared to just $2.5 billion in short positions, nearly a 7:1 ratio.
Additionally, Trump’s announcement came around 5 PM on Friday, when market liquidity is low, creating a conducive environment for heightened price volatility and drastic movements. The Kobeissi Letter added:
“We believe this crash resulted from a mix of multiple sudden technical factors. It does not carry long-term fundamental repercussions. A technical correction was overdue; we anticipate a trade deal will materialize, and crypto remains robust. We are optimistic.”
The crypto market crash on Friday triggered a $20 billion wave of liquidations, forcing nearly 1.6 million traders out of their positions within 24 hours, surpassing prior crises such as the FTX exchange downfall and the Terra/LUNA collapse.
Related: Crypto sentiment shifts to ‘Fear’ as Bitcoin crashes following Trump’s tariffs
Analysts caution about 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 react to the Trump tariff announcement and its macroeconomic implications, according to Cory Klippsten, CEO of Bitcoin services firm Swan Bitcoin.
The market sell-off will “flush out leveraged traders and weak hands,” and subsequently consolidate to pave the way for the next rally to new peaks, Klippsten told Cointelegraph.
Other analysts and traders contend that the $20 billion in crypto liquidations represents merely the tip of the iceberg, suggesting that reported losses account for only a fraction of the actual financial impact on the markets and their participants.
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