Friday’s record $19 billion crypto market liquidation event has left traders divided, with some accusing market makers of a coordinated sell-off while analysts point to a more natural deleveraging cycle.
Friday’s flash crash saw open interest for perpetual futures on decentralized exchanges (DEXs) fall from $26 billion to below $14 billion, according to DefiLlama.
Crypto lending protocol fees surged past $20 million on Friday, the highest daily total on record, while weekly DEX volumes climbed to more than $177 billion. The total borrowed across lending platforms also dropped below $60 billion for the first time since August.
Some analysts see organic market reset
Despite multiple traders pointing to a coordinated correction caused by platform glitches and large market participants, blockchain data suggests that most of the record liquidation was organic.
During Friday’s crash, open interest saw a $14 billion decline, but at least 93% of this decline was a “controlled deleveraging, not a cascade,” according to Axel Adler Jr, analyst at blockchain data platform CryptoQuant.
Out of the $14 billion, only $1 billion worth of long Bitcoin (BTC) positions were liquidated, which marks a “very mature moment for Bitcoin,” Adler said in a Tuesday X post.
Still, not everyone is convinced the event was purely mechanical. Several market watchers have accused major market makers of contributing to the collapse by pulling liquidity from exchanges at critical moments.
Looking at order book data, market makers allegedly created a “liquidity vacuum” that exacerbated the correction, according to blockchain sleuth YQ.
Market makers started withdrawing liquidity at 9:00 pm UTC on Friday, an hour after President Donald Trump’s tariff threat.
By 9:20 pm UTC, most of the tokens bottomed, while market depth on tracked tokens fell to just $27,000, a 98% collapse, said YQ in a Monday X post.
Blockchain data platform Coinwatch also highlighted the 98% market depth collapse on Binance, the world’s largest cryptocurrency exchange.
“When the token price crashed, both MMs pulled everything from the books. 1.5 hours later, Blue turned their bots back on and returned to providing similar amounts of liquidity as before. Meanwhile, Turquoise is in the books but barely at all,” Coinwatch said in a Sunday X post.
Looking at another unnamed Binance-listed token worth over $5 billion, two out of three market makers “deserted their responsibility for 5 hours.”
Coinwatch also claimed to be in discussion with the two market makers to “accelerate their return into the order books.”