Friday’s selloff triggered what Bitwise portfolio manager Jonathan Man called the worst liquidation event in crypto history, with more than $20 billion wiped out as liquidity disappeared and forced deleveraging took hold, in an article on X published on Saturday.
Perpetual futures contracts – “perps” for commercial shorthand – are cash-settled contracts with no expiration that reflect spot via funding payments, not delivery. Net profits and losses on a shared margin pool, which is why, in a crisis, sites may need to quickly reallocate their exposure to maintain accounting balance.
Man, who is the lead portfolio manager of the Bitwise Multi-Strategy Alpha Fund, said bitcoin fell 13% from peak to trough in a single hour, while long-tail tokens’ losses were much greater – he added that ATOM “dipped to virtually zero” on some sites before rebounding.
It estimated that about $65 billion in open interest had been wiped out, returning positioning to levels last seen in July. The big numbers, he argued, mattered less than the plumbing: When uncertainty soars, liquidity providers expand their quotes or step back to manage inventory and capital, organic liquidations stop settling at the price of bankruptcy, and institutions turn to emergency tools.
According to Man, trading in this situation relied on safety valves.
He explained that automatic deleveraging was triggered on some sites, forcibly closing some of the profitable counter positions when there was not enough liquidity on the losing side to pay the winners.
He also pointed to liquidity vaults that are absorbing distressed flows – Hyperliquid’s HLP “had an extremely profitable day”, he said, buying at deep discounts and selling at high prices.
What failed and what held
Man said centralized sites saw the most dramatic upheaval as order books dwindled, which is why long-tail tokens broke harder than bitcoin and ether.
In contrast, he said DeFi liquidations were subdued for two reasons: major lending protocols tend to accept prime collateral such as BTC and ETH, and Aave and Morpho “hard-coded the price of USDe to $1,” limiting the risk of cascading.
Although USDe remained solvent, he said it was trading around $0.65 on centralized exchanges amid illiquidity, leaving users who posted it as margin on those sites vulnerable to liquidation.
Beyond directional traders, Man highlighted the hidden exposures of market neutral funds. He said the real risks on days like Friday are operational: the algorithms work, the trades stay active, the notes accurate, the ability to move margin and execute hedges on time.
He spoke with several managers who indicated they were doing well, but said he wouldn’t be surprised if “some top-tier trading teams were put in place.”
Man also described an unusually wide dispersion between sites, at times citing spreads of more than $300 between Binance and Hyperliquid on ETH-USD.
Prices have recovered from extremely low levels, he said, and positioning pushes have created opportunities for dry powder traders. Man also mentioned that with the sharp drop in open interest rates, markets entered the weekend on a stronger footing than the day before.
