Rozanne

as it became the largest single-day wipeout in digital asset history.
More than 1.6 million traders were affected, and between $140 billion and $233 billion was erased from overall crypto market capitalization. The shock went far beyond immediate losses, as it exposed structural weaknesses in the system and triggered cascading effects that rippled across the entire market.

1. Leverage Cascade and Liquidity Breakdown

The core driver was excessive leverage. As prices began to fall, exchanges were forced to close out overleveraged positions, primarily long trades, which made up almost $17 billion of the total liquidations. This created a vicious cycle:

Forced selling intensified the decline as long positions were unwound.

Liquidity dried up, with order books nearly empty — down by about 98% at the peak of the crash. Even small sell orders caused massive swings, sending some altcoins down 80% in seconds.

Futures wiped clean: more than $65 billion in open interest disappeared overnight, the largest leverage washout on record, pushing the entire market into a “risk-off” stance.

Altcoin carnage: while Bitcoin fell by roughly 12% to around $107,000, major altcoins like Dogecoin and Cardano dropped up to 40%. On illiquid exchanges, coins such as SUI and ATOM briefly plunged by 80–100%, with some tokens effectively trading at zero before bouncing back.


2. Centralized Exchange Failures and Systemic Weakness

The crash also revealed the fragility of centralized trading platforms.

Exchange outages left traders unable to log in or close positions during peak volatility. Binance, among others, acknowledged disruptions and promised user compensation reviews.

Margin system risks came into focus, as certain collateral assets — including tokenized staked assets and synthetic dollar products — suddenly lost value, triggering further forced liquidations.

Stablecoin instability shook confidence. One major stablecoin briefly dropped to 65 cents before recovering, but the short-lived depeg fueled panic and dragged its governance token down nearly 40%.


3. Market Sentiment and Behavioral Shifts

The psychological impact was severe.

Fear surged: the widely tracked Crypto Fear and Greed Index sank to 20, signaling “extreme fear.”

Skepticism of leverage grew louder, with traders and analysts criticizing the opaque auto-deleveraging systems used by exchanges. Calls for caution in margin trading intensified.

DeFi stood firm: decentralized protocols such as Uniswap and Aave handled record trading volumes and liquidations without operational failures, contrasting sharply with centralized platforms’ struggles.

Bearish bias took over: derivatives funding rates on Binance turned negative for three consecutive days, showing traders were betting against further price recovery.


Context Behind the Crash

The liquidation storm was sparked by geopolitical turmoil, particularly fresh tariff threats from the U.S. against China. Combined with the heavy use of leverage and fragile market infrastructure, this geopolitical shock turned into the most destructive liquidation event in crypto history — one that dwarfed earlier crises such as the COVID-19 crash in 2020 and the collapse of FTX in 2022 by more than ten times.#MarketPullback #PowellRemarks #Binance #btc #sol