Friday’s record $19 billion crypto market liquidation event divided traders, with some accusing market makers of a coordinated sell-off while analysts pointed to a more natural deleveraging cycle.
Friday’s flash crash saw open interest in perpetual futures on decentralized exchanges (DEXs) fall from $26 billion to less than $14 billion, according to DefiLlama.
Crypto lending protocol fees surpassed $20 million on Friday, the highest daily total on record, while weekly DEX volumes soared to over $177 billion. Total borrowed on lending platforms also fell below $60 billion for the first time since August.
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Some analysts see a reset in the organic market
Although several traders pointed to a coordinated correction caused by platform issues and large market participants, blockchain data suggests that most of the record selloff was organic.
During Friday’s crash, open positions saw a $14 billion drop, but at least 93% of that drop was “controlled deleveraging, not a waterfall,” according to Axel Adler Jr, an analyst at blockchain data platform CryptoQuant.
Of the $14 billion, only $1 billion of long Bitcoin (BTC) positions were liquidated, marking a “very mature moment for Bitcoin,” Adler said in a Tuesday X article.
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Yet not everyone is convinced that the event was purely mechanical. Several market observers have accused major market makers of contributing to the collapse by withdrawing liquidity from exchanges at critical times.
By reviewing order book data, market makers allegedly created a “liquidity vacuum” that exacerbated the correction, according to blockchain detective YQ.
Market makers began withdrawing liquidity at 9:00 p.m. UTC on Friday, an hour after US President Donald Trump’s tariff threat.
As of 9:20 p.m. UTC, most tokens have bottomed out, while the market depth of tracked tokens has fallen to just $27,000, a 98% collapse, YQ said in a Monday X article.
Blockchain data platform Coinwatch also highlighted the 98% collapse in market depth on Binance, the world’s largest cryptocurrency exchange.
“When the token’s price collapsed, both MMs took everything off the books. An hour and a half later, Blue turned its bots back on and started providing similar amounts of liquidity as before. Meanwhile, Turquoise is on the books but almost not at all,” Coinwatch said in a Sunday X article.
Looking at another unidentified token listed on Binance worth over $5 billion, two out of three market makers “abandoned their responsibilities for 5 hours.”
Coinwatch also claimed to be in discussions with the two market makers to “accelerate their return to order books”.
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