The crypto market faced its largest leverage wipeout in history last weekend, but the turmoil won’t leave a lasting mark, according to Matt Hougan, Bitwise’s chief investment officer.
In a blog post published Tuesday, Hougan described the sharp drop as “an incident” and it’s not a big deal. He added that the crypto “got a passing grade” in its handling of the sale.
“Many DeFi platforms performed flawlessly: Uniswap, Hyperliquid, Aave and others reported no losses,” he wrote, while noting that Binance and other exchanges were facing issues. “Overall, cryptocurrencies have done as well or better than traditional markets would have done in the same situation,” he said.
The crash occurred after US President Donald Trump threatened to impose 100% tariffs on Chinese imports, sparking fears of a trade war. Bitcoin (BTC) plunged nearly 15%, while altcoins like Solana (SOL) fell as much as 40%. Around $20 billion in leveraged positions were liquidated.
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The damage was “contained”
On Monday, Bitcoin rebounded to around $115,000, nearly erasing the weekend’s losses. Hougan said the rapid recovery indicates the strength of blockchain infrastructure. “The damage was limited to individual investors,” he added, noting that no major institutions collapsed during the event.
The Bitwise director said the sell-off was mainly fueled by highly leveraged traders rather than fundamental changes. He claimed that nothing fundamental about crypto’s outlook, including its underlying technology, security or regulatory environment, had changed.
“Over time,” Hougan concluded, “I expect the market to catch its breath and renew its focus on crypto fundamentals. When that happens, I believe the bull market will continue apace.”
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Analysts are divided on record cryptocurrency selloff
Meanwhile, analysts are divided over Friday’s record crypto market selloff. Some accused major market makers of orchestrating a coordinated sell-off, while others called it a natural deleveraging event.
The flash crash caused open interest in perpetual futures to plummet from $26 billion to below $14 billion, while decentralized exchange (DEX) volume surpassed $177 billion and crypto lending fees hit an all-time high of $20 million.
Analysts at CryptoQuant said the data suggested an orderly market reset rather than a panic-driven collapse. Of the $14 billion cleared of open interest, approximately 93% represented controlled deleveraging, and only $1 billion of long Bitcoin positions were liquidated.
However, some observers blamed the withdrawal of liquidity by market makers for the worsening crash. Blockchain investigator YQ said liquidity began disappearing from order books around an hour after Trump’s tariff threat, creating a “liquidity vacuum” that saw market depth drop by 98% before prices hit their lowest level.
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