$20B Wiped in Crypto Market Meltdown, Says Bitwise Manager
Friday's sell-off led to a historic liquidation event in the crypto market, wiping out over $20 billion due to vanishing liquidity and forced deleveraging. Bitwise portfolio manager Jonathan Man highlighted this in an article. Key points include:
- Bitcoin and Long-Tail Tokens: Bitcoin saw a 13% drop in one hour, while some long-tail tokens like ATOM dropped to near-zero levels before recovering.
- Open Interest Reduction: Approximately $65 billion in open interest was wiped out, resetting positions to July levels.
- Exchange Responses: Exchanges used safety measures such as auto-deleveraging and liquidity vaults to manage the situation. Hyperliquid's HLP made significant profits by buying low and selling high.
- Centralized vs. DeFi Markets: Centralized exchanges experienced more dramatic disruptions, while DeFi liquidations were limited due to blue-chip collateral and hardcoded price mechanisms for USDe.
- Operational Risks: Despite the turmoil, most market-neutral funds managed operational risks effectively, though some less-prepared trading teams might have faced difficulties.
- Market Recovery: Prices recovered from lows, and the reduction in open interest provided a firmer market footing going into the weekend.
The event highlighted the vulnerabilities and resilience of different parts of the crypto market during times of stress.