Markets Rebound After Largest Ever Crypto Liquidation Event

After a turbulent weekend, the crypto market is showing early signs of recovery following one of the largest liquidation events in its history.

What began as an escalation in trade tensions quickly turned into a flash crash that wiped out more than US$20 billion in leveraged positions. The speed and scale of the move caught many traders off guard and has left many investors questioning what happened, why it unfolded so quickly, and what it means for the market going forward.

What Unfolded

Market volatility spiked late Friday after trade tensions between the United States and China escalated. U.S. President Donald Trump’s threat to impose new tariffs on China sparked a wave of risk aversion across global markets, sending both stocks and crypto prices lower.​

Overnight, Trump followed up on social media with posts announcing plans for a 100% tariff on Chinese imports. The news deepened the sell-off and triggered a cascade of liquidations, causing a flash crash that rippled through the market.

During the crash, Bitcoin (BTC) fell ~12% to lows of US$107,000, while Ethereum (ETH) dropped ~20% to US$3,400. Many altcoins were hit even harder, with some plunging more than 50%.

In total, nearly US$7 billion in positions were liquidated within a single hour. By the end of the day, total liquidations had surged to almost US$20 billion, with roughly US$16.7 billion of that coming from long positions. According to CoinGlass, it marked the largest single-day wipeout in crypto history by dollar value.

Why It Happened

Many analysts and traders spent the weekend dissecting the chain of events behind the sell-off. While several theories continue to circulate, one thing is clear: there was a significant build-up of leverage across the system.

A large number of traders were positioned long in anticipation of a strong Q4, taking on leverage across both centralised and decentralised perps exchanges. The steady rise in open interest created the conditions for a rapid and severe unwinding once prices began to fall.

Although events like this have become less common as the crypto market has developed, they remain an important reminder of the risks that come with excessive leverage. Flash crashes, while painful, often serve a cleansing role by flushing out excess risk and restoring balance to the market.

The Bigger Picture

In times like these, it’s important to zoom out and keep perspective.

This flash crash was very different from the structural or fundamental black swan events seen in past cycles. It was a leverage-driven event, not a breakdown in the underlying crypto ecosystem.

This episode served as a critical stress test for the industry. While some platforms experienced disruptions, many others, including Coinstash, continued to operate seamlessly, highlighting how much the market’s infrastructure has matured.

Although prices were impacted in the short term, many assets have already shown strong recoveries. At the time of writing, Bitcoin (BTC) is trading around US$115,000, Ethereum (ETH) remains above US$4,100, and most altcoins have rebounded significantly from the lows, showing that market confidence remains intact.

Global crypto adoption is surging, and institutional demand is gaining momentum as more investors look to digital assets for diversification and long-term growth. With further rate cuts still expected in Q4, macro conditions remain favourable for digital assets.

The recent volatility highlights both the risks and the resilience of this market. While price swings can be sharp, crypto continues to recover and evolve, reinforcing its position as a maturing and enduring part of the global financial landscape.