Flash Crash and Rebound Leave Crypto In Recovery Mode

After a day that started with the sky falling, it’s pretty calm in crypto land.

The market rebound is well underway, with Bitcoin rising briefly past $102,000 after crashing below $93,000 in the wee hours of the morning. Other tokens were hit worse, with Ether, XRP and Chainlink all crashing as much as 33% and Solana plunging around 20% before rebounding

The cause, it was widely agreed, was the imposition of tariffs on Canada, Mexico and China by President Donald Trump, who later pulled back and delayed the start of Canadian and Mexican tariffs. Once again, the narrative that Bitcoin is a store of value and hedge against economic turmoil didn’t pan out, at least in the short term.

By far, the biggest statistic bandied about was that liquidations hit a record $2.3 billion on Feb. 3, surpassing even the COVID collapse and FTX bankruptcy.

Which is true.

But, as investor CMS Holdings posted this morning when red ink was flowing freely, the markets are bigger and more resilient than they were in November 2022, when Sam Bankman-Fried’s fraud came to light, and much bigger than in 2020, when COVID brought the world to a halt.

“Guys, the covid crash, everyone was walking around insolvent, the equity market was nuking and people were unsure if they had real jobs the coming week; this is just an isolated crypto flush, its not even in the same zip code,” they posted early in the day.

The Bigger Picture

To put it in perspective, crypto’s market capitalization almost doubled in 2024, ending the year at $3.4 trillion. Bitcoin did even better, climbing 121% over the course of the year.

As Bloomberg Senior ETF Analyst Eric Balchunas put it at 8 a.m. EST, Bitcoin’s one-year return had fallen all the way to 110%. “The horror!” he quipped.

On Jan. 13, Bitcoin dropped lower than it did on Sunday, pushing below $91,000. On March 20, it dropped more than 8%, and on Aug. 5, it dropped 10%, the worst drop since November 2022, when FTX declared bankruptcy, and BTC dropped 22% in a day.

And when COVID hit back in March 2020, Bitcoin lost half its value in two days.

Ether was hit harder during this selloff, dropping as much as 33% before rebounding. ETH remains almost 20% below its Friday high of $3,400.

Despite the North American center of global tensions today, “the crypto market's severe losses were primarily concentrated in Asian trading hours, suggesting regional rather than global panic selling,” said Xu Han, a director at Hong Kong-based VC firm HashKey Capital’s Liquid Fund.

“The crypto market may have overreacted relative to traditional markets, which saw milder declines in the 2% to 3% range.”