JPMorgan reveals the real culprit behind the market crash! Why did Bitcoin fall today, leading to a liquidation of 20 billion?

The analyst team led by JPMorgan Managing Director Nikolaos Panigirtzoglou released a report revealing that the true driving force behind last week's major collapse in the crypto assets market was not ETF investors or institutions, but rather crypto native traders using perpetual futures. Over $20 billion in leveraged positions were liquidated, and why did Bitcoin fall today? The answer points to the chain reaction triggered by Trump's tariff policy.

JPMorgan Data Breakdown: ETF Investors Have Barely Moved

JPMorgan analysts clearly pointed out in their report that there is almost no evidence of large-scale liquidation of spot Bitcoin exchange-traded funds (ETFs), which are usually favored by traditional retail investors. Data shows that from October 10 to October 14, Bitcoin ETFs experienced a cumulative outflow of $220 million, accounting for only 0.14% of total managed assets. In comparison, Ethereum ETFs had a cumulative outflow of $370 million, accounting for 1.23% of total managed assets. Although the percentage is higher, it remains moderate compared to the scale of the market crash.

This discovery overturns the intuition of many market participants. During last week's fall, social media was filled with discussions of “institutional sell-off” and “ETF collapse,” but data from JPMorgan proves that the liquidation of traditional investors was actually quite limited. Major Bitcoin ETF products such as BlackRock's IBIT and Fidelity's FBTC saw relatively stable net outflows during this period, and there was no panic selling. This indicates that retail and institutional investors holding ETFs demonstrated stronger resilience in the face of a major market crash compared to native crypto traders.

The question of why Bitcoin fell today cannot be answered by the ETF data. A capital outflow of 0.14% is far from enough to trigger such a drastic price fluctuation. Based on the approximately 50 billion USD in assets currently managed by BlackRock's IBIT, the outflow of 220 million USD accounts for only 0.44%, which is considered normal range volatility in traditional financial markets. Therefore, JPMorgan has shifted its investigation focus to other market participants.

Similarly, the Chicago Mercantile Exchange (CME) Bitcoin futures – a key indicator measuring institutional positions – saw almost no liquidations. The open interest in CME Bitcoin futures fell by only about 5% last week, far below the 40% fall in perpetual contracts. This further confirms that institutional investors are not the primary drivers of the market crash. However, the de-leveraging in CME Ethereum futures is even greater, analysts say, which may reflect a “greater degree of de-risking” by momentum traders such as commodity trading advisors (CTA) and quantitative funds.

Perpetual Contract Falls 40%: Native Coin High Leverage Collapse

In contrast, perpetual contracts—a product typically favored by native cryptocurrency traders (including retail and institutional investors)—have undergone a sharp deleveraging. The open interest in Bitcoin and Ethereum perpetual contracts, measured in USD, has decreased by about 40%, outpacing the price declines of these two assets. This unusual phenomenon is a key clue as to why Bitcoin is down today.

Perpetual contracts are a unique derivative tool in the crypto assets market, similar to traditional futures but without an expiration date. Traders can engage in long and short positions using high leverage (typically ranging from 10x to 125x) through perpetual contracts. When the market experiences extreme volatility, high-leverage positions are prone to triggering forced liquidations. Analysis from JPMorgan indicates that during last week's market crash, the open interest of perpetual contracts fell significantly more than the price drop, implying that a large number of leveraged positions were forcibly liquidated.

The specific numbers are even more astounding. According to CoinGlass data, over $20 billion in leveraged positions were completely wiped out last Friday alone, affecting more than 1.5 million traders. This is one of the largest liquidation events in the history of Crypto Assets, second only to the “519 massacre” in May 2021. Bitcoin, Ethereum, and altcoins all saw significant falls, with long positions being the first to be hit, but short positions also faced liquidation during the subsequent rebound.

JPMorgan analysts clearly pointed out that this pattern indicates that native investors in Crypto Assets were the main drivers of last week's market pullback, while non-native investors (who are more likely to use CME futures or Crypto Assets ETFs) essentially took a wait-and-see approach. This conclusion is crucial for understanding why Bitcoin has fallen today: it's not institutions selling off, but rather over-leveraged native traders self-destructing.

The structural characteristics of the perpetual contract market amplified this market crash. When prices began to fall, the long positions with the highest leverage were liquidated first, and these passive sell orders further depressed prices, triggering the next round of liquidations, creating a chain reaction. This “liquidation waterfall” effect is particularly evident in the perpetual contract market because many exchanges adopt similar liquidation mechanisms and price indices, resulting in liquidations occurring almost simultaneously.

Trump's tariffs become the fuse, native coin leverage ignites explosives

(Source: The Block)

Last Friday, the crypto assets market experienced the largest liquidation event in history, partly due to the latest round of tariff policies announced by U.S. President Trump. Trump announced a 100% tariff on products imported from China, triggering panic in global markets. Traditional stocks plummeted, and the risk-off sentiment surged, with investors fleeing risk assets. Bitcoin, as a high-beta asset, was hit hardest by this macro shock.

However, JPMorgan's analysis reveals deeper mechanisms. Trump's tariffs are merely the fuse; the real explosive is the massive leverage accumulated within the native coin space. Before the announcement of the tariff news, the open interest in the perpetual contract market was already at historic highs, with financing rates continuously positive, indicating that the market was flooded with bullish leveraged longs. When Trump's tariffs triggered the initial decline, these fragile leveraged positions collapsed rapidly, magnifying the policy shock into a market crash.

The question of why Bitcoin fell today has a clear answer within this framework: external macro shocks combined with excessive internal leverage have created catastrophic consequences through their resonance. JPMorgan's report is essentially telling the market not to overinterpret the actions of institutional or ETF investors; the real risk comes from the uncontrolled leverage management in the crypto native market.

Although the price has stabilized since then, market sentiment remains cautious. According to The Block's Bitcoin price page, Bitcoin's current trading price is around $108,500, having fallen about 2.5% in the past 24 hours. This price level is still higher than last Friday's low, but has dropped over 13% from the historical high of $126,000.

Market Structure Differentiation: Traditional Investors vs. Native Traders

JPMorgan's report reveals an important structural differentiation in the Crypto Assets market. Traditional investors (participating through ETFs and CME futures) exhibit behavior patterns that are drastically different from those of crypto native traders (participating through perpetual contracts). The former are more cautious, with lower leverage levels, and can remain calm during major market crashes. The latter, on the other hand, are more aggressive, with high-leverage trading prevalent, making them susceptible to cascading liquidations during market volatility.

This differentiation is crucial for understanding why Bitcoin is falling today. If the market is primarily dominated by ETF investors, price fluctuations will be more stable, as these investors typically adopt a buy-and-hold strategy without using leverage. In contrast, if native traders dominate, the market will be more volatile, as high leverage and perpetual contract liquidation mechanisms will amplify price fluctuations.

The current market is in a tug-of-war between these two forces. The launch of the ETF has brought institutional funds and stability to Bitcoin, but the scale of the perpetual contract market is still enormous, and the influence of native traders cannot be ignored. JPMorgan's report reminds market participants that when analyzing a market crash, it is essential to distinguish between the behaviors of different participants rather than broadly blaming “institutional sell-offs” or “retail panic.”

In the future, as the scale of ETFs continues to grow, the influence of traditional investors may gradually surpass that of native traders, which will lead to a more stable Bitcoin price trend and reduce the frequency of extreme volatility. However, before that, the market still needs to be vigilant about the leverage risks accumulated in the perpetual contract market, as the next major market crash may once again be triggered by this area.