In the largest liquidation event in crypto history, more than 1.6 million traders lost their positions and over $19 billion in leveraged trades were wiped out. For context, the market crash during COVID-19 in March 2020 caused about $1.2 billion in liquidations, while the FTX collapse in 2022 led to around $1.6 billion.
Understanding What Happened
The trigger came from politics. After President Donald Trump announced new hostility toward China, global markets began selling off. Hours later, with U.S. markets closed, he confirmed a 100% tariff on Chinese imports. Because crypto trades nonstop, moderate selling during low-liquidity hours turned into a cascade of automatic liquidations across exchanges.
About a quarter of all liquidations came from Bitcoin, meaning overleveraged altcoin traders took the biggest hits. Yet the cause ran deeper than a headline. The tariff news was the spark, but the explosion came from inside the industry itself.
Data and visualization: Coinglass
Leverage trading: A trader expects a coin to rise and opens a long position using $1,000 of their own money while borrowing $9,000 from the exchange to trade a total of $10,000. This is called 10x leverage, where every 1% move in price becomes a 10% change to their account. If the coin’s price falls by about 10%, the trader’s $1,000 is wiped out, and the exchange automatically sells the position to recover its loan. These automatic sell-offs are called liquidations. When many leveraged trades are liquidated at once, the forced selling pushes prices down further, triggering even more liquidations in a self-reinforcing spiral. The same principle applies in reverse to short positions, where traders borrow coins expecting prices to drop.
This is only the basics. We explore these dynamics in depth in my books Crypto from Scratch and Trade Smart.
CEX vs DEX
During the event, many exchange systems broke under pressure. Stop losses failed to trigger, orders went unfilled, and users were unable to add margin as platforms became unstable within minutes. The liquidation cascade unfolded so quickly that most traders had no time to react, leaving billions in positions closed automatically.
Most trading still happens on centralized exchanges (CEX) such as Binance, Bybit, and OKX. These platforms act as intermediaries and hold user funds in their own accounts. A newer alternative is the decentralized exchange (DEX) like Hyperliquid, where trades are executed by smart contracts and users retain control of their assets. The sharpest declines in altcoins occurred almost entirely on centralized exchanges, suggesting that the wave of liquidations was driven primarily by liquidity issues stemming from the exchange itself or its market-maker.
Did you know? A large trader opened over a billion dollars in short positions on Hyperliquid just before the tariff announcement, later closing them for an estimated $200 million profit.
The Industry’s Contradiction
Crypto was created to escape centralized control. In 2009, Satoshi Nakamoto introduced Bitcoin as a direct response to failing banks and government bailouts. The message encoded in Bitcoin’s first block, “Chancellor on the brink of second bailout for banks,” was a clear protest against financial manipulation. It offered a peer-to-peer system built on transparency, free from middlemen and hidden power.
Photo: Getty
Sixteen years later, the picture is very different. Financial giants such as BlackRock and Fidelity now facilitate Bitcoin exposure for their clients, while governments experiment with digital versions of their national currencies. What began as an escape from the banking system has become deeply intertwined with it.
The Dark Side of the Boom
This transformation has a cost. Over time, the industry’s biggest problems have become visible:
- Influencers and celebrities promote “projects” they’re secretly paid to endorse, then dump them on followers.
- Exchanges act as gatekeepers, demanding high listing fees or a share of project tokens before approval.
- Public companies issue debt or new shares to buy crypto for their balance sheets.
- Rogue market makers manipulate prices behind the scenes.
- Thousands of new tokens launch daily with just a few clicks, many designed for pump-and-dumps.
- Hacking groups such as Lazarus continue draining billions through sophisticated exploits.
- World leaders like Trump and Milei have launched or endorsed their own memecoins.
Every cycle ends the same way: wealth flows from retail traders to larger players. I have seen parts of this up close; that story is for another time.
Where Crypto Goes from Here
Millions lost much of their capital in this event. Is this the end of the cycle? No one knows. The signs of exhaustion are clear, yet the typical blow-off top has not appeared. What is certain is that the industry itself has changed. The ideals that once drove crypto have been replaced by institutions, algorithms, and tech billionaires running a system that looks more like technocratic governance rather than financial freedom.
Continue exploring power, money, and technology:
- The US–China tech race
- Our multipolar global order
- How central banks move markets
- The network behind Silicon Valley
- Information warfare
Understand the system before using it.
