When the leverage breaks: What the weekend crypto crash revealed

On Friday, the crypto market experienced its most violent deleveraging event to date. Over US$19 billion in positions were liquidated in a matter of hours, marking the largest single-day wipeout in crypto history.

This was triggered from Trump announcing 100% tariffs on Chinese imports. At first glance, it looked like a textbook macro-driven selloff, Bitcoin dipped from around US$117,000. But what followed was anything but ordinary. As prices slid, a cascade of forced liquidations triggered a chain reaction, sending prices on some exchanges into freefall before snapping back within minutes.

To grasp the scale of the chaos, consider how far some major assets plunged intraday before recovering. Bitcoin dropped as low as US$108,000 before rebounding to US$115,300. Ethereum fell to US$3,550, only to recover to US$4,100. Solana tumbled to US$130 before bouncing back to US$196, while XRP halved from US$2.52 to US$1.25 before regaining ground. HYPE crashed to US$20 before doubling back to US$40.

These weren’t genuine market-clearing prices, they were the result of liquidation vacuums, where overleveraged positions collapsed into thin order books, and market makers hadn’t yet stepped in to restore balance.

The real problem: leverage, not Trump

While the tariff announcement was the trigger, it wasn’t the root cause. The real issue was how fragile the market structure had become.

This bull market has looked very different to past cycles. It’s been led by Bitcoin, with no broad-based “alt season.” In previous cycles, nearly every token rallied together, a rising tide that lifted all boats. This cycle, only a handful of coins have outperformed, leaving many retail traders searching for alternative ways to achieve the asymmetric returns associated with altcoins.

Perpetual futures (“perps”) became the weapon of choice for the punter looking for outsized returns. Decentralised exchanges like Hyperliquid made this even more popular. especially after its late-2024 airdrop, one of the largest in crypto history, which rewarded users for trading activity rather than profitability. It minted a new generation of inexperienced traders who made fortunes because they traded a lot, not because they traded well.

Since then, competitors like Aster and Lighter have launched with their own promised airdrops, fueling yet another round of speculative, high-risk trading. This has resulted in a massive leverage build up, particularly in thinly traded altcoins.

When liquidity disappears

As Bitcoin broke below key support levels on Friday, the dominoes began to fall. Margin calls, forced liquidations, and vanishing liquidity turned a routine correction into a flash crash.

Many traders had failed to implement basic risk management, no stop losses, no isolated margin. When the tide went out, it revealed just how exposed the market had become.

Yet amid the chaos, there were signs of resilience. BTC Markets remained fully operational, with no downtime reported, unlike several larger offshore platforms. We saw healthy volumes and strong dip-buying activity, particularly from long-term investors.

Australia’s crypto market is maturing

This aligns with findings from our latest BTC Markets Investor Study Report. Crypto adoption in Australia is hitting new highs, led by older Australians, women, and SMSFs. These investors are disciplined, strategic, and long-term focused.

SMSF trading volumes rose 151% year-on-year. Women investors outperformed, trading less frequently but with larger initial deposits. This shift from speculative trading to strategic allocation is a structural evolution, not a passing trend.

Bitcoin vs traditional assets: a tale of two risk profiles

Friday’s crash also reignited the debate around Bitcoin’s role in a diversified portfolio. Compared to traditional assets like gold or bonds, Bitcoin remains more volatile, but also more responsive to macro catalysts.

Gold, for instance, barely moved on the tariff news, its stability is both a strength and a limitation. Bitcoin, by contrast, reacts swiftly, offering both risk and opportunity. For investors with a long-term horizon and appropriate sizing, this volatility can be a feature, not a bug.

Looking ahead: from chaos to clarity

The weekend’s events served as a sharp reminder of the risks that come with unchecked leverage and the fragility of decentralised market infrastructure. Yet, amid the volatility, they also underscored the resilience of the crypto asset class and the growing sophistication of Australian investors.

Looking ahead, several strategic themes are emerging. First, risk management is no longer optional, leverage can supercharge returns, but without discipline, it becomes a liability. 

Second, infrastructure resilience matters. Exchanges must prioritise uptime, transparency, and investor protection to maintain trust, especially during periods of stress. And finally, education is empowerment. As more Australians enter the crypto space, equipping them with the tools and knowledge to make informed decisions is critical.

The crypto market is evolving. It’s no longer just about moonshots and memes, it’s about building resilient portfolios for a world increasingly shaped by policy shocks, digital disruption, and financial innovation.