Bitcoin experienced a dramatic price decline on Friday, plunging by $16,700 within just eight hours, representing a staggering 13.7% correction. This drop resulted in Bitcoin’s value falling to $105,000 and contributed to a significant $5 billion in liquidations during the same period. The market turmoil underscored ongoing volatility in the wake of the recent introduction of spot Bitcoin ETFs, which had been expected to stabilize trading conditions.
The latest crash raised concerns as portfolio margin systems encountered failures, exacerbating the liquidation figures. In the case of the recent downturn, a staggering 13% of total futures open interest in Bitcoin terms was wiped out. The significant scale of these fluctuations, however, is not unprecedented in Bitcoin’s history; even leaving aside the infamous “COVID crash” on March 12, 2020, which saw a 41.1% intraday plunge, there have been 48 other instances where Bitcoin experienced more severe corrections.
The past year alone has seen notable downturns, including a 16.1% drop recorded on November 9, 2022, coinciding tragically with the collapse of the FTX exchange. This dramatic market event was driven by revelations regarding the insolvency of Alameda Research, which had considerable exposure to FTX’s native token, FTT. The fallout led to widespread panic and withdrawal freezes.
Despite the perception that intraday crashes of 10% or more may be less frequent following the launch of spot Bitcoin ETFs in January 2024, the reality remains that Bitcoin’s historical volatility persists. The evolution of market structures, including increased trading on decentralized exchanges (DEXs), further complicates this narrative. Recent post-ETF data reflects continued turbulence, including instabilities on key dates, indicating the market’s capacity to react sharply to economic pressures.
The Friday liquidation crisis was compounded by close to $2.6 billion in bull positions being forcefully closed on the Hyperliquid decentralized exchange. Several major trading platforms, including Binance, faced issues with margin calculations, while DEX participants reported automatic deleveraging. This scenario left many traders, even those who had previously made significant gains, grappling with the unexpected termination of positions—reflecting the vulnerabilities of using leverage in illiquid market conditions.
Interestingly, during the crash, Bitcoin/USDT perpetual futures traded about 5% below the spot Bitcoin prices but failed to bounce back to their previous levels. Typically, such discrepancies would provide lucrative opportunities for market makers; however, uncertainty in the market seemed to hinder a swift return to normalcy.
The overhanging tension of thin liquidity over the weekend also contributed to the disruption. With U.S. bond markets closed for a national holiday on Monday, the potential for further stabilization appeared increasingly complex. Rumors of insolvency within various sectors had added to the anxiety, prompting market makers to adopt a cautious approach.
As the dust settles on this latest episode of volatility, it is anticipated that it may take several days for the Bitcoin derivatives markets to fully assess the damage sustained and to ascertain whether the $105,000 level will act as a foundation or whether further declines are imminent. Observers remain vigilant, reflecting on the broader implications for cryptocurrency trading and market resilience.
