A record $19 billion cryptocurrency market liquidation event on Friday has sparked a divide among traders, with some believing that market makers engaged in coordinated selling, while analysts pointed out that this is a more natural deleveraging cycle.
According to DefiLlama, during the flash crash on Friday, the open interest of perpetual contracts on decentralized exchanges (DEX) fell from $26 billion to below $14 billion.
Cryptocurrency lending protocol fee revenue surpassed $20 million on Friday, setting a new single-day record. DEX trading volume for the week exceeded $177 billion. The total borrowing amount across lending platforms fell below $60 billion for the first time since August.
Despite several traders believing that platform failures and large market participants caused a coordinated correction, blockchain data shows that most of the record liquidations occurred organically.
Axel Adler Jr, an analyst at blockchain data platform CryptoQuant, noted that during the crash on Friday, the open interest decreased by $14 billion, with at least 93% attributed to "orderly deleveraging" rather than a chain reaction.
Adler stated on Tuesday on X (formerly Twitter) that only $1 billion worth of Bitcoin long positions were liquidated, marking a "very mature moment for Bitcoin."
However, not everyone agrees that the event was entirely mechanical. Several market observers accused major market makers of withdrawing liquidity from exchanges at critical moments, exacerbating the market crash.
Blockchain investigator YQ indicated that order book data suggested market makers created a "liquidity vacuum," intensifying the market correction.
Market makers began withdrawing liquidity at 9 PM UTC on Friday, coinciding with President Trump's threat of increased tariffs just an hour earlier.
YQ posted on Monday on X (formerly Twitter) that by 9:20 PM UTC, most token prices had bottomed out, with the market depth of tracked tokens' order books plummeting to just $27,000, a 98% drop.
Blockchain data platform Coinwatch also highlighted the 98% collapse in market depth on Binance, the world's largest cryptocurrency exchange.
Coinwatch stated on Sunday on X (formerly Twitter): "When token prices crashed, both market makers completely withdrew from the order book. An hour and a half later, Blue restarted its bot, restoring liquidity comparable to before. Turquoise, while still on the order book, had almost no liquidity."
Looking at another unnamed token listed on Binance, valued at over $5 billion, two-thirds of the market makers "abandoned their responsibilities within 5 hours."
Coinwatch also claimed to be in discussions with these two market makers to "accelerate their return to the order book."
Related: Economists say that if history repeats itself, Bitcoin (BTC) could rebound by up to 21% within 7 days after a drop.
Original article: “Analysts say: The $19 billion crypto market crash is 'controlled deleveraging,' not a cascade”
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