On Friday, the cryptocurrency market experienced what has been described as the worst liquidation event in its history, with over $20 billion in assets liquidated. Jonathan Man, a portfolio manager at Bitwise, noted that this sell-off was marked by a rapid 13% drop in Bitcoin within just one hour, alongside significant declines in various long-tail tokens.
Man estimated that approximately $65 billion in open interest was erased, bringing market positioning back to levels last seen in July. He emphasized that the impact of such events goes beyond headline figures, as liquidity providers often withdraw during periods of uncertainty, leading to a breakdown in organic liquidations.
During this turmoil, some exchanges activated auto-deleveraging mechanisms, which forcibly closed profitable positions when there was insufficient cash to cover losses. Man highlighted that liquidity vaults, such as Hyperliquid, managed to capitalize on the situation by purchasing assets at steep discounts.
