Crypto Market Prospect: After the Washout, the Soil Looks Richer

Market Reaction - A sharp sell-off in the crypto market occurred following President Trump's threat of a 100% tariff on Chinese goods, leading to price gaps and reduced liquidity [1] - The weekend rout resulted in the liquidation of approximately $19 billion in leveraged positions, impacting around 1.6 million accounts, with Bitcoin dropping below $110,000 and Ether falling under $4,000 [2] DeFi and Trading Activity - DeFi activity surged during the market turmoil, with decentralized exchange (DEX) volumes increasing and protocol fees rising, indicating funding stress rather than a breakdown in protocol usage [3] - Traders experienced margin calls and forced unwinds, leading market makers to reduce inventory risk and a decline in open interest [6] Market Sentiment and Volatility - The volatility across both short-dated and long-dated maturities increased significantly, with concerns about downward market movements [5] - Analysts noted a record one-day liquidation, with trade headlines related to tariffs causing de-risking across futures and spot pairs [4] Future Outlook - The current deleveraging process is expected to reduce excess and lower the risk of another chaotic market event in the near term, with historical trends suggesting steadier advances following funding resets [8] - Key indicators to watch include net creations into spot ETFs, growth in stablecoin issuance, and order book depth during Asian and European trading sessions, as these may signal potential price recovery [8]