The sudden market crash on Friday, which sent the value of some cryptocurrencies down as much as 95% in less than 24 hours, does not indicate long-term declines or deterioration of fundamentals, according to investment analysts at The Kobeissi Letter.
Friday’s market crash was triggered by a perfect storm of short-term factors, including “excessive leverage and risk,” as well as US President Donald Trump’s decision announcement 100% tariffs on China, analysts he wrote.
Kobeissi’s letter cited the market’s robust long bias, with $16.7 billion in long positions liquidated compared to just $2.5 billion in miniature positions, a ratio of almost 7:1.
Moreover, Trump’s announcement came on Friday around 5 p.m., when market liquidity is low, creating fertile ground for increased price volatility and enormous, outsized moves. The Kobeissi Letter added:
“We believe this outage was caused by a combination of multiple sudden technical factors. It has no long-term fundamental implications. The technical correction has been delayed; we believe a trade agreement will be reached and the cryptocurrency remains strong. We are optimistic.”
Friday’s cryptocurrency crash triggered a $20 billion liquidation cascade, knocking nearly 1.6 million traders out of their positions in 24 hours, dwarfing previous crises including the collapse of the FTX exchange and the Terra/LUNA ecosystem.
Related: Crypto Market Sentiment Turns to ‘Fear’ as Bitcoin Falls Following Trump’s Tariffs
Analysts advise caution in the miniature term as leveraged traders are forced out of markets
Bitcoin (BTC) investors and traders should expect near-term price volatility as markets digest Trump’s tariff announcement and macroeconomic implications, according to Cory Klippsten, CEO of bitcoin services company Swan Bitcoin.
The market rout will “clear out leveraged and weak-handed traders” and consolidate to provide fuel for another rally towards modern highs, Klippsten told Cointelegraph.
Other analysts and traders say the $20 billion cryptocurrency liquidation is the tip of the iceberg, and reported losses are only a fraction of the actual financial damage to markets and participants.
Warehouse: Elon Musk’s Dogecoin pump is coming? SOL Projected to Reach $300 in 2025: Trade Secrets
