20 Billion Dollar Loss: Shocking Developments in the Crypto Market

Significant Liquidations in the Crypto Market

Bitwise's portfolio manager Jonathan Man announced that over 20 billion dollars in value was lost in the crypto market last Friday. This liquidation event was triggered by Bitcoin's drop of 13% within an hour. During this period, sharp recoveries from extremely low levels also drew attention.

Man noted that approximately 65 billion dollars' worth of open positions were wiped out, bringing the market position back to July levels and exposing weak structures in long-tail tokens.

Market Dynamics and Cash Management

Due to difficulties in providing liquidity, Man stated that Auto-Deleveraging and profitable wallet activities on Hyperliquid came to the forefront. On the other hand, decentralized finance (DeFi) protective measures and stable USDe pricing limited impactful liquidations.

The wave of selling that occurred on Friday resulted in one of the largest liquidation events in crypto history. Liquidity was lost during this period and forced deleveraging was activated. Cash-settled contracts, known as perpetual futures, are linked to the local market and funding payments.

Shifts in Derivative Markets

Bitcoin dropped 13% from its highest level of the week to its lowest within just one hour. Losses in long-tail tokens were even more severe; for example, ATOM approached zero on some exchanges but experienced a sudden rebound. Man summarized the situation by stating, "When uncertainty increases, liquidity providers widen prices or pull back to manage inventory and capital."

Additionally, he emphasized that central exchanges experienced the most dramatic issues. He stated that long-tail tokens struggled more than Bitcoin and Ethereum. Factors contributing to the calmer DeFi liquidations include major lending protocols generally accepting high-quality collateral like Bitcoin and Ethereum, and Aave and Morpho maintaining USDe at a fixed price of 1 dollar.

Risks and Opportunities

Man pointed out that not only directional investors but also market-neutral funds carry hidden exposure risks. He noted that the real risks on days like Friday are operational. The functionality of the infrastructure, the active operation of exchanges, accurate price tracking, and timely margin movements are critically important. While he mentioned that many managers were in position, he warned that some third-tier trading teams might face challenges.

Finally, Man stated that with the significant reduction in open positions in the market, they entered the weekend with a more solid foundation.