Has there been the biggest crash ever in the crypto market?

Between Friday and Saturday there was a strong crypto market crash, probably the largest ever. 

Although it was indeed a crash of epic proportions in some respects, it is important to make some clarifications about it to avoid overestimating it. 

The Crypto Market Crash

On Friday, the price of Bitcoin was just below $122,000, while that of Ethereum was below $4,400.

At a certain point, China announced restrictions on rare earth exports, apparently reigniting the trade war with the USA. 

Despite it being just an announcement, the reaction of the markets was immediately negative. 

The US stock markets suddenly lost about 3%, but then closed for the weekend. 

On the crypto markets, however, it seems that chaos has begun. 

Within five hours, the price of Bitcoin fell below $116,000, but then American President Donald Trump publicly announced that he had once again imposed tariffs on Chinese imports, this time at 100% starting from November 1st. 

Despite this being just an announcement, the drop turned into a real crash, with Bitcoin falling well below $110,000 in just half an hour, and Ethereum at $3,500. 

However, the crash ended there, and it was immediately followed by a rebound. 

The reasons for the crypto market crash

The main reason for this crash was the fear of a new escalation in the trade war between the USA and China, similar to that of April. 

The fact is that this hypothesis already proved to be excessive in the following hours. 

For example, at this moment on Polymarket, the probability is given at only 17% that 100% tariffs by the USA against China will actually take effect on November 1st. 

However, in the half hour following Trump’s outburst, this was evidently not clear, so much so that fear generated a true panic selling which, although temporary, caused a cascading forced liquidation of millions of leveraged long positions. 

It is estimated that on Friday a total of over 19 billion dollars of leveraged positions were forcibly liquidated in the crypto markets. 

In these cases, the forced liquidations of long positions mean involuntary forced sales, as they are executed automatically by the platforms to prevent users’ account balances from entering negative territory, but they generally last for a short time.

Cryptos respond with an instant rebound

In fact, half an hour after the flash-crash, the price of Bitcoin had already temporarily returned to $115,000, although this level did not hold in the following hours. 

Three hours later, in fact, Bitcoin once again fell below $110,000, but at that point, a true rebound occurred. 

At first, it temporarily stabilized just below $112,000, but when it was discovered that Trump had slightly misrepresented China’s real intentions, which in reality did not impose a true export ban on rare earths, it rose first to $114,000 and then today to $115,000. Ethereum, on the other hand, has returned above $4,100. 

For this reason, the probability that tariffs will actually be imposed at 100% against China on November 1st is currently given at only 17%.

The fact is that both statements seem more like mere negotiating moves rather than clear and definitive decisions that have already been effectively made and are therefore about to actually come into effect. 

Note that the US stock exchanges closed shortly after Trump’s announcement, and just before the crypto flash-crash ended. 

The Record of Liquidations

If we focus only on the spot market, which is where the actual buying and selling of crypto tokens takes place, Friday’s flash-crash was not record-breaking, except for the absolute value amount of the price drops. 

In reality, what truly matters are the percentage drops, and Bitcoin temporarily lost 12% during the acute phase of forced liquidations, then stabilized at a -10%, which is nothing particularly exceptional. Furthermore, already after the first phase of the rebound, it had reduced the losses to -8%.

The actual all-time high, however, is recorded in the futures market, where actual buying and selling of tokens do not occur, but only the exchange of contracts on prices. 

Due in particular to what happened on the DEX Hyperliquid, positions totaling over 19 billion dollars were liquidated, a figure never seen before in the crypto market, and much higher than the previous record. 

So the (negative) record was not recorded on the actual cryptocurrency market, but on the futures contracts market for cryptocurrency prices.

Nevertheless, several altcoins have lost a lot in a very short time even on spot markets. It should always be remembered that many altcoins are purely speculative assets, and in high-risk speculative markets, it is not so unusual for crashes of 50% to occur in just a few hours. 

The prices of Bitcoin and Ethereum, for example, have not recorded significant drops, except for the absolute value amount, which is more of a curiosity than anything else. 

The Accusations of Manipulation

Just before Trump’s announcement, which triggered the largest wave of liquidations ever in the crypto derivatives markets, someone opened a million-dollar short position on Hyperliquid, thus earning hundreds of millions of dollars. 

It is hypothesized that it was an insider who took advantage of prior knowledge of the US president’s intentions to speculate on those liquidations. 

It should be remembered that many speculators lost millions of dollars due to that flash-crash. 

Furthermore, given that Donald Trump himself is personally involved in activities in the crypto markets, the hypothesis has also spread that he may have played a leading role in what happened, far beyond just being a passive spectator of something that he himself triggered.