Why Markets Suddenly Dipped Last Friday – and Why Some Cryptos Crashed Harder Than Others
Summary
Both equities and crypto sold off after the U.S. president unveiled 100% tariffs on Chinese imports. Stocks corrected but stayed orderly, while crypto futures suffered a historic $19B liquidation cascade that punished leveraged altcoin traders the most.
What happened
Stocks: the Nasdaq slid about 3.6% and the S&P 500 about 2.7% on the tariff headline. By Monday, semiconductor and AI names led a rebound once the rhetoric softened.
Crypto: between Friday and Saturday the market endured its largest liquidation wave on record. Roughly $19B in leveraged long positions vanished, Bitcoin briefly touched $104–105K, and many altcoins lost multiples of that percentage before clawing back part of the drop.
Why did cryptos fall so much more than stocks?
- Leverage and liquidation cascades: Perpetual futures dominate crypto volume and allow high leverage. Once prices slipped, liquidation engines forced long positions out, creating a chain reaction that fed on thin weekend liquidity.
- Higher risk and volatility: Bitcoin and altcoins carry far higher beta than equities. Macro shocks therefore translate into outsized moves: many altcoins dropped 30–70% while major stock indexes stayed in single-digit losses.
- Structural differences: In equities, leveraged instruments are regulated, time-bound, and often halted. Crypto leverage is embedded and available 24/7, so spiral sell-offs can continue unchecked without circuit breakers.
Why some cryptos crashed more than others
- Liquidity and market depth: Bitcoin and Ethereum had the cushion of deep books; memecoins and newer L1/L2 tokens faced sharper slippage and deeper collapses.
- Exchange-specific leverage: venues with higher limits or rich funding rates saw proportionally more forced liquidations.
- Investor composition: fast-moving, speculative traders dominate altcoins, so capital fled more quickly amid macro uncertainty.
Comparison to stocks
- Magnitude: the S&P 500 fell roughly 2.7%, Bitcoin briefly sank 12–14%, and many altcoins lost far more — a stark reminder of crypto’s higher beta and embedded leverage.
- Recovery: equities bounced early the next week as U.S.–China tensions cooled, but crypto stayed jittery while traders waited to see whether China would retaliate.
The role of algorithmic trading and leverage
Automatic trading and stop systems
Momentum, volatility-targeting, and CTA-style models add fuel to falling markets. Because crypto trades around the clock without central stabilisers, automated selling hits harder than in equities.
Leverage (“vipuvaikutus”)
Pros: lets traders gain exposure or hedge with less capital.
Cons: losses compound rapidly, liquidation thresholds trip suddenly, and Friday’s data showed most liquidations were over-levered longs.
Best practices for using leverage
- Keep leverage modest — 2–3× on altcoins is already aggressive.
- Use external stop systems instead of relying solely on exchange triggers.
- Scale position size to volatility using tools like ATR.
- Hold extra margin in cash so you can absorb sudden swings.
- Monitor funding rates; extended positive funding usually signals an overheated market vulnerable to a flush.
(These are general risk management practices, not investment advice.)
Key takeaways
- Macro beats micro: one geopolitical announcement moved every risk asset, but crypto moved exponentially more.
- Structural risk is real: always-on leveraged futures can self-reinforce sell-offs during shocks.
- Discipline wins: if you automate or use leverage, pre-plan worst-case scenarios — flash crashes are part of how these markets work.