The cryptocurrency market faced the largest scale of leveraged liquidations in history over the weekend, but according to Bitwise Chief Investment Officer Matt Hougan, this turmoil will not leave a lasting impact.
In a blog post on Tuesday, Hougan described the sharp decline as "a minor episode" and not a big deal. He added that cryptocurrencies "passed" the test of handling the sell-off.
"Many DeFi platforms performed perfectly: Uniswap, Hyperliquid, Aave, etc., all reported zero losses," he wrote, while noting that Binance and some other exchanges encountered issues. "Overall, the performance of cryptocurrencies was as good as, if not better than, traditional markets under the same circumstances," he said.
The crash occurred after U.S. President Trump threatened to impose a 100% tariff on Chinese imports, raising concerns about a trade war. Bitcoin (BTC) plummeted nearly 15%, while altcoins like Solana (SOL) saw declines of up to 40%. Approximately $20 billion in leveraged positions were liquidated.
By Monday, Bitcoin rebounded to around $115,000, nearly erasing the weekend's losses. Hougan stated that the rapid recovery indicates the strength of blockchain infrastructure. "The losses were limited to individual investors," he added, noting that no large institutions collapsed during the event.
The Bitwise executive mentioned that the sell-off was primarily driven by highly leveraged traders rather than a change in fundamentals. He claimed that the fundamentals of the cryptocurrency outlook, including its underlying technology, security, or regulatory environment, had not changed.
"As time goes on," Hougan concluded, "I expect the market to catch its breath and refocus on the fundamentals of cryptocurrencies. When that happens, I believe the bull market will continue to develop rapidly."
Meanwhile, analysts have differing views on Friday's record cryptocurrency market liquidation. Some blame major market makers for orchestrating a coordinated sell-off, while others describe it as a natural deleveraging event.
The flash crash caused the open interest in perpetual futures to plummet from $26 billion to less than $14 billion, while decentralized exchange (DEX) trading volume surged to over $177 billion, and cryptocurrency lending fees hit a historic high of $20 million.
CryptoQuant analysts stated that the data shows this was an orderly market reset rather than a panic-driven crash. Of the $14 billion in liquidated open interest, about 93% represented controlled deleveraging, with only $1 billion in Bitcoin longs being liquidated.
However, some observers attributed the exacerbation of the crash to market makers withdrawing liquidity. Blockchain investigator YQ noted that liquidity began to disappear from the order book about an hour after Trump's tariff threat, creating a "liquidity vacuum," with market depth declining by 98% before prices hit bottom.
Related: Market Resilience Under Flash Crash: How the ADL Mechanism Protects Fund Safety
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