Friday marked the largest liquidation event in crypto history.
Over $19 billion in positions were wiped out across centralized exchanges.
More than 1.6 million traders were liquidated with their accounts zeroed out in an instant.
In just one hour, Bitcoin fell 13% from peak to trough.
Altcoins, of course, suffered far worse.
ATOM, a vaporware token with a $2 billion market cap before the flash crash, briefly traded to zero before rebounding.
Prices have recovered from those extreme lows, but this was historic, nearly double the size of the second-largest liquidation event, 2021’s China mining ban sell-off.
The headlines point to Trump’s 100% tariff threats against China late Friday as the catalyst.
But in markets, headlines are usually used to assign blame after the fact.
In reality, the amount of leverage built up in the system made a rapid collapse like this inevitable.
On the day of the crash, Bitcoin futures open interest hit $100 billion.
You see, ever since the memecoin craze fizzled out in the spring, traders have been searching for their next hit.
With no “alt season” to chase, they turned to perpetual futures with massive leverage.
Perps are zero-sum games: the losers pay the winners.
When the losers run out of margin, the exchanges liquidate them to protect themselves.
Under normal conditions, those liquidations are absorbed naturally by market liquidity.
But when fear spikes rapidly, liquidity providers step back.
That’s when things unravel and that’s exactly what happened Friday.
Liquidity vanished and the exchanges’ Auto De-leverage kicked in.
Even profitable traders were forced out of winning positions because the platforms couldn’t pay them.
In total, open interest dropped $65 billion in a single day.
However, there’s some evidence that suggests this may be a coordinated attack.
One whale opened nine figures’ worth of shorts just minutes before the cascade began.
Public data shows his final short was placed at 4:49 PM, one minute before Trump’s tariff tweet at 4:50.
He then closed 90% of his Bitcoin short and all of his ETH short, locking in $190 to $200 million in profit in under 24 hours on Hyperliquid.
That kind of timing raises serious questions about insider information.
For leveraged traders and long-only funds, Friday was a wipeout.
But for long-term Bitcoin holders, it was just another Friday.
On-chain data shows over 60% of Bitcoin hasn’t moved in more than a year.
Treasury and ETF institutional wallets, holding over 2 million BTC, didn’t react at all as those markets were closed.
While $11 billion in Bitcoin open interest was cleared, history shows every major leverage flush like this, such as in 2020, 2021, and 2023, has reset the market and paved the way for stronger rallies.
In many ways, this weekend was a bull run reset.
A harsh reminder that those playing with leverage are just renting coins, while Bitcoiners own private keys.
Because in the long run, nothing beats Bitcoin in cold storage.
