new York
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The value of cryptocurrencies plunged Friday in a short but significant flash crash, leaving investors with billions of dollars in losses and highlighting the volatility associated with the sector.
Traders were rattled after President Donald Trump threatened new tariffs on imports from China, triggering a sell-off in risky assets like tech stocks and crypto and a flight to safe havens like gold and silver, both of which are trading at record highs.
From bitcoin to meme coins, cryptocurrencies sank as investors sold their holdings and highly leveraged positions were closed amid a sharp and unexpected downturn.
The mini-crash resulted in the liquidation of a record $19 billion, according to CoinGlass data analysis.
Although cryptocurrency prices have since rebounded, around 1.6 million traders saw their positions liquidated on Friday, according to the Kobeissi Letter..
After Trump’s tariff threat Friday, nervous investors abandoned their riskiest bets and fled to the perceived safety of government-issued Treasuries and gold. The tech-heavy Nasdaq Composite fell 3.56% while bitcoin fell 15% at its lowest point. The S&P 500 recorded its worst day since April.
Bitcoin fell from around $122,500 to a low of around $104,600 on Friday afternoon. Ethereum, the world’s second-largest cryptocurrency by market value, fell about 21%.
“The aggressive selling of cryptocurrencies was triggered by a rush to risk,” said Lukman Otunuga, senior market analyst at FXTM.
Highly speculative coins were hit much harder: Dogecoin fell more than 50%, according to Coinmarketcap data. President Donald Trump’s $TRUMP coin fell about 63% at its lowest point.
The decline was exacerbated by the fact that a large number of highly leveraged traders borrowed money to increase the size of their bets. This is a high-risk game that has become a regular feature of cryptocurrency trading.
When everything goes well, the payoff from a leveraged bet is attractive. But when traders are caught on the wrong side of a strong price action, it can expose them to huge losses.
Highly leveraged bets can be automatically closed by exchanges when it becomes clear that losses will exceed investors’ ability to repay them. The forced closing of positions contributed to the scale and scale of the market shock.
“Friday’s move is a classic example of how leverage can amplify short-term volatility in a 24/7 market,” said Samir Kerbage, CIO at Hashdex, a crypto asset management company. “As prices began to fall, margin calls and forced liquidations became widespread across all venues. »
Investors have also been concerned about possible technical shortcomings in the crypto market after a stablecoin exchange on Binance, a crypto exchange, briefly decoupled from its one-to-one relationship with the US dollar.
“Some platform modules briefly experienced technical issues, and some assets had unanchoring issues due to strong market fluctuations,” Binance said in a statement.
Social media users have also raised concerns about anonymous accounts holding crypto wallets that may have benefited from short selling in the crypto market – and whether insider trading could have been involved. Although speculation about insider trading is commonplace in certain segments of the crypto market, it is an allegation that can be extremely difficult to prove.
Bitcoin was hovering around $115,000 on Monday, stabilizing after falling below $105,000 on Friday, but so far failing to recoup all of its losses. Bitcoin had reached an all-time high above $126,000 on October 6.
“Structural forces – ETF adoption, institutional inflows and regulatory clarity – continue to support long-term growth,” said Kerbage at Hashdex.
Although crypto rebounded slightly and stocks rallied on Monday, uncertainty is still supporting the market. Silver futures – a safe haven amid uncertainty – soared 7% on Monday and hit a record high.
