Friday’s unprecedented $19 billion crypto market liquidation has sparked debate among traders, with some alleging a coordinated sell-off by market makers, while analysts attribute it to a routine deleveraging cycle.
During the flash crash, open interest in perpetual futures on decentralized exchanges (DEXs) plummeted from $26 billion to under $14 billion, according to DefiLlama.
Crypto lending protocol fees soared past $20 million on Friday, marking an all-time daily high, while weekly DEX trading volumes exceeded $177 billion. Meanwhile, total borrowings across lending platforms fell below $60 billion for the first time since August.
Analysts Suggest Market Reset Was Mostly Organic
While some traders have blamed platform glitches and major market players for a coordinated correction, blockchain data indicates that the majority of Friday’s record liquidation was driven by natural market forces.
During the crash, open interest dropped by $14 billion, yet Axel Adler Jr., analyst at blockchain data platform CryptoQuant, noted that at least 93% of this decline was a “controlled deleveraging, not a cascade.”
Of the $14 billion decrease, only $1 billion in long Bitcoin positions were liquidated—a sign, Adler said in a Tuesday X post, of a “very mature moment for Bitcoin.”
Skeptics Point to Market Maker Activity
Not everyone believes the crash was purely mechanical. Some market observers have accused major market makers of intensifying the decline by withdrawing liquidity at critical moments.
According to blockchain researcher YQ, order book data suggests market makers created a “liquidity vacuum” that worsened the correction.
Liquidity withdrawals reportedly began at 9:00 pm UTC on Friday, an hour after former President Donald Trump’s tariff announcement. By 9:20 pm UTC, most tokens had hit their lows, and market depth for tracked tokens plunged to just $27,000—a 98% collapse, YQ noted 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 market makers pulled everything from the order books. About 1.5 hours later, Blue reactivated their bots and resumed providing liquidity at levels similar to before. Meanwhile, Turquoise remained in the books, but barely at all,” Coinwatch reported in a Sunday X post.
For another unnamed Binance-listed token valued at over $5 billion, two of the three market makers reportedly “abandoned their responsibilities for five hours.”
Coinwatch added that it is in talks with these market makers to “speed up their return to the order books.”
