For a few frantic hours last Friday, the cryptocurrency market suffered what mainstream outlets called “the biggest rout in history.” Roughly $19 billion in leveraged positions were liquidated in a single day, according to Reuters.
That’s a lot – even bigger than the collapse of FTX back in 2022. More than during the COVID crash of 2020. And prices moved – bitcoin fell about 14%, ether dropped 12%, and some smaller tokens lost more than half their price before partially rebounding. The headlines were dramatic, especially across mainstream finance media. Crypto skeptics smelled blood in the water.
But beneath the panic, something remarkable happened:
The crypto ecosystem bent – but it didn’t break.
No bailouts. No taxpayer rescues. No central bank “liquidity injections.”
Just a brutally efficient, automated clearing of bad bets and excessive leverage.
In other words, a real stress test. And it’s one that crypto passed.
Leverage, liquidity and liquidation
The immediate trigger wasn’t even crypto-related. President Trump’s surprise 100% tariff on Chinese imports sparked a global risk-off reaction. Digital assets trade around the clock – and during the thinner weekend hours, that shock met a wall of over-leveraged traders.
Bloomberg reported that auto-deleveraging mechanisms on major exchanges like Binance and Hyperliquid amplified the sell-off. With few circuit breakers and liquidity drying up, volatility rose – and algorithms dumped positions faster than humans could react.
Within hours, billions in speculative positions were erased. Again, that’s the biggest single event in crypto history.
Yet by Monday morning, Bitcoin had already stabilized near $115,000 – still nearly four times higher than its 2023 average.
In traditional markets, an event of that magnitude would have triggered air raid sirens blowing across Washington D.C. and emergency meetings between bank CEOs and the Federal Reserve. A parade of bailouts, backstops and finger-pointing. Maybe two dozen Congressional hearings over the next few years. In other words, the three-ring circus we’ve seen over and over again since 1999…
In crypto, though?
The market simply cleared – and kept going.
Crypto markets just passed a milestone stress test
Neha Narula, director of MIT’s Digital Currency Initiative, told Bloomberg that “there was a big crash, but it worked.”
“We weren’t talking about bailing anyone out,” she noted. “We were talking about learning.”
That’s a profound difference.
For all its volatility, the decentralized financial system just survived its largest-ever shock without relying on governments, central banks or emergency life support from new funding.
This isn’t just a story about resilience – it’s about evolution. The shake-out flushed out excessive leverage, exposed a handful of technical weak spots and reminded participants that real value comes from ownership, not speculation.
Bitcoin itself proved once again why it’s the “blue-chip” of crypto. As analyst Nic Puckrin put it, the crash “cleaned out the excessive leverage and reset the risk in the market – for now.”
Even as altcoins plunged, bitcoin’s investor flows held steady, according to on-chain data.
Takeaways for long-term investors
Market cycles are natural. They reveal who’s gambling versus those who are actually investing.
Short-term traders chase volatility with borrowed money trying to turn a buck into $1,000. In the process, they actually create more volatility for everyone.
Long-term investors use downturns to strengthen their positions, dollar-cost averaging into dips and spikes alike. (Thanks, speculators!)
And the difference isn’t just temperament or mindset – it’s built into the structure of the crypto markets themselves. So let me be very blunt: This will happen again. It’s just another part of the market cycle. If you’re a long-term, buy-and-hold investor, it’s best to come to terms with this. It’s easy to own assets that are going up – much harder for many to HODL when they go down.
Get used to it. The best advice I can offer you is this: Once you make up your mind, ignore daily price moves. If your retirement is 10-25 years in the future, who cares how much DOGE price rose or fell today? How relevant is that going to be in 2051 when you blow out the candles on your Happy Retirement! Cake?
So relax!
Easier said than done if you’re a speculator, though – if you’re speculating on leverage, you cannot afford to relax. Ever.
Own your crypto the right way
At BitIRA, we believe digital assets belong in a long-term, self-directed, tax-advantaged account – not in a 100x margin account. Not at the mercy of exchanges’ autoliquidation algorithms.
This is why we don’t offer leverage in BitIRA accounts. It’s not because we’re old-fashioned – it’s because we’re focused on security, not speculation.
There’s an old trader’s joke one of my coworkers brought up last week, in the middle of the sell-off::
“You know what they say. Margin traders sleep like babies. They wake up every hour screaming and then soil themselves.”
That’s not how retirement investing should be.
By contrast, owning your cryptocurrency outright – secured in a fully-insured, offline custody arrangement – means you can choose to sleep through the panic and only bother looking at the long-term trend.
The market just proved it can weather a historic storm without breaking.
The question is whether you can do the same.
Crypto’s momentum isn’t slowing
For those saving for retirement, a Self-Directed IRA that allows for digital assets offers the tax efficiency and security of a regulated retirement account, without exposing you to the casino-style risks of margins, leverage and more obscure financial derivatives.
Data from Benzinga shows that younger savers are catching on. Nearly 20% of Millennials already include crypto in their retirement portfolios, and over 60% plan to add more this year. To me, that doesn’t look like speculative frenzy – more like long-term conviction.
The crash was loud, but the signal underneath was clear:
Crypto markets are maturing. Excess leverage was purged, infrastructure held, and bitcoin re-asserted its role as the future of money.
For investors thinking in decades, not days, that’s the kind of resilience worth building around.
