Friday’s dramatic sell-off has entered the record books as what Bitwise portfolio manager Jonathan Man described as the worst liquidation event in crypto history, erasing more than $20 billion in value as liquidity vanished and forced deleveraging gripped the market.
Man, who oversees the Bitwise Multi-Strategy Alpha Fund, said that Bitcoin plunged 13% within a single hour, while smaller-cap tokens suffered even steeper collapses. On some exchanges, assets like Cosmos (ATOM) briefly crashed “to virtually zero” before recovering, underscoring how fragile liquidity became during the event.
The wipeout, according to Man, wiped away nearly $65 billion in open interest, resetting speculative positioning to levels last seen in July. But he emphasized that the scale of the losses was secondary to the structural breakdown that caused them. “When uncertainty spikes, liquidity providers widen quotes or pull back entirely,” he explained. “Organic liquidations stop clearing at bankruptcy prices, and exchanges are forced to activate emergency tools.”
Among those tools were auto-deleveraging systems, mechanisms that forcibly close profitable counterpositions when losing traders can no longer meet margin calls. Man said this safeguard was triggered on several major venues as collateral pools dried up.
He also noted that some liquidity vaults, including Hyperliquid’s HLP, capitalized on the chaos by absorbing distressed assets at deep discounts and selling into rebounds.
While centralized exchanges bore the brunt of the turmoil due to thinning order books, DeFi platforms remained largely stable. Protocols like Aave and Morpho, which rely on blue-chip collateral such as BTC and ETH, avoided cascading failures. Both also benefited from smart contract safeguards, including Aave’s hardcoded $1 peg for USDe, that helped prevent contagion across decentralized markets.
Man concluded that the episode served as a stark reminder of crypto’s systemic fragility: when volatility spikes and leverage unwinds, the real test lies not in prices, but in the resilience of market infrastructure itself.