Bitwise Chief Investment Officer Matt Hougan says the recent crypto market flash crash was a temporary event rather than a structural problem. He argued that leverage, not fundamentals, drove last week's record $20 billion liquidation, with no lasting damage to crypto's core outlook.
The turmoil began late Friday after President Trump posted on Truth Social that he would impose 100% tariffs on all Chinese imports. Traders reacted in the only market still open at the time, with Bitcoin tumbling as leveraged positions unwound in a cascade representing the largest known liquidation in crypto history.
Bitcoin fell 15% toward $100,000 on some exchanges at its worst point, while Ethereum dropped over 20% and $SOL plunged 40%. However, by Monday morning, Bitcoin recovered to around $115,000 after Trump seemingly attempted to de‑escalate tensions, returning near the level before his initial post.
In a note to clients late Tuesday, Hougan said crypto rebounded quickly because nothing fundamental to its outlook changed. He outlined three key questions the episode prompted: whether any major player collapsed, how the technology held up, and how investors reacted to the volatility.
After speaking with Bitwise's partners, ranging from custodians to liquidity providers, Hougan noted that losses appeared contained to individual traders rather than large institutions or service providers. Firms experienced losses but appear to have all survived, which helped the market recover quickly, he wrote.
On the technology front, Hougan said blockchains themselves performed well under stress. Decentralized platforms like Uniswap, Hyperliquid and Aave ran smoothly, though some centralized venues had issues, giving crypto a passing grade overall in handling the volatility as well as or better than traditional markets might have.
The third signal came from Hougan's inbox, where he received minimal contact from professional investors despite media inquiries spiking. He wrote that when investors are truly panicked, his communications explode, but “In this case, it was crickets,” suggesting the sell‑off did not shake long‑term confidence.
Hougan concluded that the flash crash will not be of any lasting consequence. The long‑term drivers of crypto's growth, including regulatory progress, institutional adoption, and continued disruption of traditional markets, remain intact despite short‑term jitters in the market.
He noted that market makers and liquidity providers typically pull back for a few days following big volatility events. The lack of liquidity can lead to exaggerated moves either up or down, but over time, Hougan says he expects the market will “catch its breath” and renew its attention on crypto's fundamentals, allowing the bull market to continue.