Bitwise portfolio manager Jonathan Man described Friday's market plunge as the largest liquidation event in cryptocurrency history, with over $20 billion erased amid vanishing liquidity and forced deleveraging, according to his Saturday X platform analysis.
Perpetual futures contracts - commonly called "perps" - are cash-settled derivatives without expiration that track spot prices through funding mechanisms. These instruments utilize shared margin pools where profits and losses are netted, requiring exchanges to rapidly rebalance exposures during market stress.
Man, who leads the Bitwise Multi-Strategy Alpha Fund, reported bitcoin dropped 13% within one hour while altcoins suffered more severe losses - noting ATOM temporarily "collapsed to near zero" on certain platforms before recovering.
He calculated approximately $65 billion in open interest disappeared, resetting market positions to July levels. The portfolio manager emphasized market infrastructure challenges mattered more than headline numbers: during volatility spikes, liquidity providers widen spreads or withdraw, organic liquidations fail to clear at bankruptcy prices, and exchanges activate emergency protocols.
Man confirmed trading platforms employed safety measures including auto-deleveraging systems that automatically close profitable positions when counterparty funds prove insufficient.
He highlighted specialized liquidity vaults that capitalized on distressed flows - specifically mentioning Hyperliquid's HLP protocol which "generated substantial profits" by purchasing at deep discounts and selling during price surges.
Market Infrastructure Stress Test
Centralized exchanges experienced the most severe dislocations as order books deteriorated, explaining why altcoins plummeted more dramatically than bitcoin and ether.
Conversely, decentralized finance (DeFi) liquidations remained contained due to two key factors: major lending protocols primarily accept established collateral like BTC and ETH, while platforms including Aave and Morpho algorithmically stabilized USDe's value at $1 to prevent cascading liquidations.
Though USDe maintained solvency, Man observed it traded around $0.65 on centralized venues during illiquid conditions - creating liquidation risks for users who posted it as margin collateral.
Beyond directional traders, the analysis revealed hidden vulnerabilities for market-neutral funds where operational risks - including algorithmic performance, exchange stability, accurate pricing, and timely margin movements - became critical concerns.
While major trading firms reported stable operations, Man suggested "lower-tier trading teams likely faced elimination" during the volatility.
The portfolio manager documented extreme price divergences across trading platforms, citing $300+ spreads between Binance and Hyperliquid for ETH-USD pairs at peak dislocation.
Despite severe declines, Man noted prices recovered from lows and position flushing created opportunities for capital-ready traders. With open interest substantially reduced, markets entered the weekend with stronger foundational support compared to Friday's conditions.