$19 billion liquidation: Bitcoin briefly crashed below $102,000. What happened?

Friday's market liquidation event was nearly 20 times larger than the March 2020 pandemic crash and significantly exceeded the fallout from major crypto catastrophes including the FTX collapse and LUNA implosion. 

Between 9:30 AM and 5:20 PM Eastern Time, the total cryptocurrency market capitalization plummeted from $4.1 trillion to $3.3 trillion, erasing $800 billion at a rate of approximately $100 billion per hour.

Bitcoin alone shed $380 billion in market value over eight hours, its first ever $20,000 daily price swing. Having reached an all-time high of more than $126,000 earlier in the week, BTC struggled to maintain support above $110,000 over the weekend. 

While Ether fell as much as 12%, other major altcoins like XRP and Solana experienced even steeper declines. 

The severity of the crypto liquidation event is made clearer when examining aggregate open interest data. Global open interest across all cryptocurrencies excluding BTC and ETH saw a near 45% reduction, with most exchanges recording similar contractions. 

Learn more about Bitcoin and how it works here.

Trump's tariff bombshell triggers market panic

The catalyst for this historic crash came in the final two hours of Friday's trading session when U.S. President Donald Trump announced via Truth Social that the U.S. would impose 100% tariffs on all Chinese imports beginning November 1. 

If made effective, it would add to an existing tariff rate of roughly 40%.

The timing proved devastating for the cryptocurrency markets, just when traditional equity markets were closing. Crypto traders were exposed during a period when liquidity typically thins and order books become more vulnerable to exploitation. 

The cascade effect was immediate and brutal, with nearly $7 billion wiped across all markets within a single hour, including $5.5 billion from long positions alone.

The tariff announcement followed Beijing's decision to tighten export restrictions on rare earth minerals, which are crucial for the automotive, semiconductor and defense industries.

China controls approximately 70% of global supply. 

Trump characterized China's stance as ‘extraordinarily aggressive’ and hinted he may cancel a planned meeting with President Xi Jinping at the upcoming APEC summit in South Korea.

Traditional markets absorbed substantial damage as well. According to SP Global data, the S&P 500 recorded its steepest one-day drop since April 10, falling 2.7%, while the NASDAQ Composite plunged 3.6% despite hitting a record intraday high earlier in the session. 

The Dow Jones Industrial Average closed down 1.9%, and the CBOE Volatility Index surged above 22 as fear gripped Wall Street.

Where does the market go from here?

Analysts remain divided on the near-term trajectory for cryptocurrency prices. Liquidation heatmap data from Hyblock Capital revealed a pocket of leveraged long positions around $98,600 for Bitcoin, suggesting further downside risk if selling pressure continues. 

However, aggregate order book data shows a substantial amount of buy orders congregating in the $110,000 to $115,000 range, potentially providing support.

Despite the carnage, some market observers maintain long-term conviction, considering instances in the past when Trump’s social media communications have been rowed back. However, macro concerns continue to lurk, including sliding oil prices, falling Treasury yields, the unwinding of the Japanese carry trade and the S&P 500 showing its first technical cracks since spring.

The crypto market now faces a critical juncture. Will institutional buyers view this crash as a generational buying opportunity, or does it represent the beginning of a deeper correction? With Trump's tariffs scheduled to take effect at the start of next month and the president's approval rating falling to 40% amid an ongoing government shutdown, the uncertainty extends far beyond the cryptocurrency market.

A spate of reports had alleged that market manipulation may be at play in the crypto liquidation event. A trader who accumulated 86,000 BTC back in 2011 set up position by selling 3,000 BTC for $363 million in stablecoins, before opening massive leveraged positions totaling over $1.1 billion against BTC and ETH throughout the week.

The trader placed $23 million in additional shorts at 4:49 PM Eastern Time; one minute later, Trump posted his tariff announcement. As Bitcoin plunged from $122,000 to below $102,000, the trader closed approximately 90% of positions at the exact market bottom.

While unconfirmed, blockchain analytics suggest the timing of these trades aligns uncannily with the announcement, prompting renewed calls for transparency in digital asset markets

The events of Friday have provided another reminder for traders and market participants that in the sphere of 24/7 markets and political volatility, BTC is not immune to global upheavals.

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