Crypto traders are still on edge Monday morning as markets recover from Friday’s unprecedented meltdown.
That’s according to Nick Forster, CEO and founder of analytics firm Derive, who said that options data shows traders playing defence.
Volatility has spiked in Bitcoin and Ethereum markets, “signalling expectations of sustained turbulence and a choppy road ahead,” Forster said in a research note on Monday.
More than $19 billion in leveraged positions were liquidated on Friday in a market-wide flash crash triggered in part by US President Donald Trump’s renewed tariff threats against China.
Bitcoin plunged 12%, Ethereum dropped 20%, and Solana sank nearly 25% before stabilising.
Altcoins, such as Dogecoin, were hit hardest, with some experiencing a drop of over 50%.
“Liquidity evaporated across crypto futures as market makers pulled quotes to avoid breaching risk limits. With order books thinned out, forced liquidations and panic selling had an outsized impact, fueling a self-reinforcing cascade,” Forster said.
Forster isn’t the only cautious voice.
Illia Otychenko, lead analyst at crypto exchange CEX.IO, told DL News that “there are still bearish signals, suggesting we could see either a deeper correction or a period of slower recovery in the mid-term.”
The selloff was one of the “largest deleveraging events ever” as excessive leverage and crowded long positions were flushed with several momentum indicators flashing overbought conditions, he said.
“For now, Bitcoin appears to be in a healthier position than it was before the drop.”
Trump trade brinkism
The panic wasn’t confined to crypto, with Trump’s trade threats reigniting global risk aversion.
The president’s call for a 100% tariff on Chinese imports on Friday, coupled with China’s own export curbs, rattled equity and commodity markets.
Wall Street reflected growing fears that Trump’s tariff threats could reignite a trade war between the world’s two largest economies.
On Friday, the S&P 500 sank 2.7%, its worst single-day drop since April, while the Dow Jones tumbled 878 points and the Nasdaq fell 3.6%.
Nearly six in seven stocks on the S&P 500 ended the day lower, led by tech giants like Apple and Nvidia.
Oil prices fell 4% as investors priced in weaker global demand, while Treasury yields sank to 4.05% amid a flight to safety.
Analysts at Citrini Research warned that Trump’s trade strategy would remain a key source of volatility.
“Trump will repeatedly bring us to the brink – progressively heightening trade tensions, but utilizing shiny objects and promises of deescalation or stimulus in an attempt to prevent collapse,” Citrini Research said in a note to investors.
Meanwhile, traders are also watching the US Federal Reserve’s next policy meeting in October, where another rate cut is expected, injecting more liquidity into the financial system.
Markets are hoping that easier monetary conditions will restore risk appetite across asset classes, with the CME FedWatch tool showing a 97% chance of a .25% cut.
Crypto market movers
- Bitcoin is up 2.8% over the past 24 hours to trade at $115,049.
- Ethereum is up 8.7% over the past 24 hours, trading at $4,175.
What we’re reading
- The Digital Asset Treasury Playbook: How to Print, Buy and Compound to ‘Alchemise’ mNAV into a Market Engine — DL News
- Record $19bn crypto crash exposes dark side of leverage boom — DL News
- Polymarket Founder Teases POLY Token in X Post — Unchained
- Alts just entered price discovery — Milk Road
- Crypto startups tapping AI hype raise $2bn. Here’s why some are unconvinced — DL News
Lance Datskoluo is DL News’ Europe-based markets correspondent. Got a tip? Email lance@dlnews.com.
