Friday’s liquidation triggered what Bitwise portfolio manager Jonathan Man called the worst liquidation event in cryptocurrency history, with more than $20 billion wiped out as liquidity disappeared and forced deleveraging took hold, in an X article published Saturday.
Perpetual futures (“delinquent” in business shorthand) are cash-settled contracts with no expiration that mirror cash through financing payments, not delivery. Net profits and losses against a shared margin fund, which is why in stressed situations venues may need to reallocate exposure quickly to keep the books balanced.
Man, who is the lead portfolio manager of the Bitwise Multi-Strategy Alpha Fund, said bitcoin fell 13% from peak to trough in a single hour, while losses in long-tail tokens were much steeper; He added that ATOM “fell to virtually zero” in some places before recovering.
It estimated that approximately $65 billion in open interest was wiped out, restoring positioning to levels last seen in July. Headline numbers, he argued, mattered less than pipelines: When uncertainty rises, liquidity providers expand quotes or step back to manage inventory and capital, organic liquidations stop liquidating at bankruptcy prices, and venues turn to emergency tools.
According to Man, in that situation the bags depended on safety valves.
He said self-deleveraging kicked in in some places, forcibly closing out parts of profitable trades when there wasn’t enough cash on the losing side to pay the winners.
He also pointed to liquidity vaults absorbing the distressed flow: Hyperliquid’s HLP “had an extremely profitable day,” he said, buying at deep discounts and selling at spikes.
What failed and what remained
Man said centralized venues experienced the most dramatic dislocations as order books shrank, which is why long-tail tokens broke out harder than bitcoin and ether.
By contrast, he said DeFi liquidations were muted for two reasons: Major lending protocols tend to accept top-tier collateral like BTC and ETH, and Aave and Morpho “hard-coded the price of USDe to $1,” limiting cascading risk.
Although the USDe remained solvent, it said it was trading around $0.65 on centralized exchanges amid illiquidity, leaving users who posted it as margin in those places vulnerable to liquidation.
Beyond directional traders, Man highlighted the hidden exposures of market-neutral funds. He said the real risks on days like Friday are operational: algorithms running, exchanges staying active, accurate ratings, the ability to move margin and execute hedges on time.
He contacted several managers who reported they were fine, but said he wouldn’t be surprised if “some C-level business teams were executed.”
Man also described an unusually wide dispersion between venues, citing spreads of over $300 at times between Binance and Hyperliquid on ETH-USD.
Prices recovered from extreme lows, he said, and waves of positioning created opportunities for dry powder traders. Man also mentioned that with open interest falling sharply, markets entered the weekend on a firmer footing than the previous day.
