Crypto Market Loses $20 Billion on Friday: Bitwise Expert Explains What Happened
Massive Crypto Sell-Off Wipes Out $20 Billion — “Worst Liquidation in History,” Says Bitwise Manager
Friday’s market crash caused what Bitwise portfolio manager Jonathan Man called the worst liquidation event in crypto history. According to him, over $20 billion disappeared as liquidity dried up and traders were forced to sell in panic.
Man explained that perpetual futures — or “perps” — are crypto contracts that don’t have an expiration date. They follow the spot price through small funding payments instead of actual delivery. When the market gets volatile, these contracts can trigger a chain reaction of forced liquidations, as exchanges rush to keep their books balanced.
Man, who manages the Bitwise Multi-Strategy Alpha Fund, said Bitcoin dropped 13% in just one hour, while smaller altcoins suffered much worse. On some exchanges, ATOM’s price nearly fell to zero before bouncing back.
He estimated that around $65 billion in open interest (the total value of outstanding contracts) was wiped out, bringing the market back to levels last seen in July. The bigger issue, he said, was not the losses themselves, but how the market systems reacted when things went wrong. When uncertainty rises, liquidity providers either widen their spreads or pull back, which makes prices swing even more and forces exchanges to use emergency tools.
Exchanges Under Pressure
Man said some exchanges had to use auto-deleveraging, a process that automatically closes part of winning positions when the losing side can’t pay up. Others used liquidity vaults to stabilize the market. For example, Hyperliquid’s “HLP” system reportedly made large profits by buying cheap assets and selling them when prices spiked.
What Broke — and What Survived
According to Man, centralized exchanges were hit hardest because their order books became thin, causing big price gaps — especially in smaller tokens. In contrast, DeFi (decentralized finance) platforms handled the stress better. Major lending protocols like Aave and Morpho mainly use Bitcoin and Ethereum as collateral, and they had safeguards in place, such as fixing USDe’s value at $1 to prevent a wider collapse.
However, USDe still traded as low as $0.65 on centralized exchanges because of poor liquidity, leaving some users exposed to liquidation.
Hidden Risks and Market Recovery
Man warned that even market-neutral funds — which are usually protected from big price moves — faced operational risks during the chaos. These included system outages, delayed margin transfers, and incorrect price data. While most professional managers said they were fine, Man noted that “some smaller trading teams probably didn’t make it.”
He also pointed out that price differences between exchanges were extreme, sometimes reaching over $300 between Binance and Hyperliquid for ETH/USD.
Despite the turmoil, prices eventually recovered, and traders with cash on hand found new opportunities. With open interest now much lower, Man said the market entered the weekend in a more stable position than before the crash.
