Jonathan Man on What Happened and How

Friday’s sell-off triggered what Bitwise portfolio manager Jonathan Man called the worst liquidation event in crypto history, with more than $20 billion wiped out as liquidity vanished and forced deleveraging took hold, in an article on X published Saturday.

Perpetual futures — “perps” in trading shorthand — are cash-settled contracts with no expiry that mirror spot via funding payments, not delivery. Profits and losses net against a shared margin pool, which is why, in stress, venues may need to reallocate exposure quickly to keep 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 far steeper — he added that ATOM “fell to virtually zero” on some venues before rebounding.

He estimated roughly $65 billion in open interest was erased, resetting positioning to levels last seen in July. The headline numbers, he argued, mattered less than the plumbing: when uncertainty spikes, liquidity providers widen quotes or step back to manage inventory and capital, organic liquidations stop clearing at bankruptcy prices, and venues turn to emergency tools.

According to Man, exchanges in that situation leaned on safety valves.

He said auto-deleveraging kicked in at some venues, forcibly closing part of profitable counter-positions when there was not enough cash on the losing side to pay winners.

He also pointed to liquidity vaults that absorb distressed flow — Hyperliquid’s HLP “had an extremely profitable day,” he said, buying at deep discounts and selling into spikes.

What failed and what held

Man said centralized venues saw the most dramatic dislocations as order books thinned, which is why long-tail tokens broke harder than bitcoin and ether.

By contrast, he said DeFi liquidations were muted for two reasons: major lending protocols tend to accept blue-chip collateral such as BTC and ETH, and Aave and Morpho “hardcoded USDe’s price to $1,” limiting cascade risk.

Although USDe remained solvent, he said it traded around $0.65 on centralized exchanges amid illiquidity — leaving users who posted it as margin on those venues vulnerable to liquidation.

Beyond directional traders, Man highlighted hidden exposures for market-neutral funds. He said the real risks on days like Friday are operational — algorithms running, exchanges staying up, accurate marks, the ability to move margin and execute hedges on time.

He checked in with several managers who reported they were fine, but said he would not be surprised if “some c-tier trading teams got carried out.”

Man also described unusually wide dispersion across venues, citing $300-plus spreads at times between Binance and Hyperliquid on ETH-USD.

Prices recovered from extreme lows, he said, and positioning flushes created opportunities for traders with dry powder. Man also mentioned that with open interest down sharply, markets entered the weekend on firmer footing than the day before.