Is the Crypto Assets crash actually a positive? TD Cowen: Large-scale liquidation proves resilience, Bitcoin target $140,000

TD Cowen analysts stated that the lightning crash triggered by Trump tariffs resulted in about $19 billion in liquidations, which not only proves that Crypto Assets are still extremely volatile but also demonstrates that the digital asset ecosystem can withstand shocks. Analysts are optimistic about BTC, predicting that the price of Bitcoin will reach approximately $141,000 by December.

The Largest Single-Day Liquidation Test in History for Ecosystem Resilience

TD Cowen analysts wrote in a report: “While we recognize that recent events have caused significant financial difficulties for many investors, what truly impresses us is the good operation of the underlying ecosystem. Despite being the largest single-day liquidation in history, with open contracts on various exchanges reduced by half, most crypto assets exchanges experienced almost no downtime.”

The scale of this cryptocurrency crash is extremely rare in history. The liquidation amount of $19.2 billion exceeds the liquidation scale during the “519 incident” in May 2021 and during the Luna/UST collapse in 2022. When liquidation occurs, leveraged traders do not have sufficient margin to maintain their positions, forcing exchanges to liquidate positions to protect the platform and other users. When a large number of liquidations occur simultaneously, it creates a chain reaction that further exacerbates the price drop.

Under such extreme pressure, the performance of the Crypto Assets ecosystem has become a key indicator of its maturity. In multiple Crypto Assets crashes before 2021, major exchanges often experienced system overloads, login failures, trading delays, and even complete outages. These technical failures not only exacerbated market panic but also prevented investors from timely adjusting their positions or executing stop-loss strategies.

However, the situation during this cryptocurrency crash is clearly different. Although the open interest has halved, meaning that a large number of positions were forcibly liquidated, the major exchanges continued to operate normally. System delays remained within acceptable limits, the order book depth was impacted but not completely exhausted, and the trading matching engine continued to operate stably under extreme load. This improvement in technical reliability shows that the cryptocurrency industry has made significant progress in infrastructure development.

TD Cowen analysts particularly emphasize the importance of this point. In traditional financial markets, system stability is the primary factor considered by institutional investors. When cryptocurrency exchanges are able to operate under extreme market conditions, it eliminates significant technical risk concerns for institutional funds entering the market. This cryptocurrency crash has actually become an involuntary stress test, and the industry has passed this test.

Bitcoin and Ethereum performed relatively stable during the crash

“Despite some lesser-known tokens being severely impacted, we believe Bitcoin and Ethereum are performing well. For example, Bitcoin briefly dipped to a low of 15%, but closed down only 8% that day,” TD Cowen analysts pointed out in the report. This price behavior reveals a trend of divergence within the Crypto Assets market.

At the beginning of this month, after US President Trump confirmed that a 100% tariff would be imposed on Chinese imports, the entire crypto assets market fell by more than 10%. The initial liquidation amount of crypto assets quickly reached 10 billion USD, and then climbed to nearly 20 billion USD. This scale of systematic sell-off usually does not differentiate asset quality, and all coins suffer indiscriminate hits. However, the speed and magnitude of the market's recovery clearly distinguish the resilience of different assets.

Bitcoin's performance during this Crypto Assets crash is especially noteworthy. The maximum intraday drop reached 15%, a magnitude sufficient to trigger a large number of leveraged position liquidations. However, the key lies in the subsequent rebound speed; Bitcoin recovered nearly half of its losses within the same trading day, closing down only 8%. This V-shaped reversal pattern indicates that after the panic selling ended, there was strong buying interest that immediately stepped in.

Ethereum's performance is similar; although its volatility is slightly greater than Bitcoin's, it also demonstrates a quick recovery ability. In contrast, many smaller market cap alternative coins (altcoins) saw declines of over 20% to 30% during the same period, with a noticeably slower recovery rate. This differentiation reflects the market's distinct pricing of liquidity and fundamental quality of different assets.

Comparison of Bitcoin and Small Tokens' Performance During the Crash:

Bitcoin: The maximum intraday decline was 15%, closing down only 8%, recovering 47% of the decline on the day.

Ethereum: The decline is slightly greater than Bitcoin but has also rebounded quickly, demonstrating the resilience of mainstream coins.

Small Tokens: Some have declined by more than 20-30%, recovery speed is slow, and liquidity exhaustion is a serious issue.

This difference in resilience provides important insights for investors. During systemic risk events, mainstream crypto assets with deep liquidity and large market capitalization demonstrate stronger pressure resistance and recovery speed. This is also one of the reasons why TD Cowen analysts are optimistic about the long-term prospects of Bitcoin.

Japanese users increase by 4 times, showing that global adoption continues to expand

In addition to praising the resilience of Crypto Assets, TD Cowen analysts pointed out that data shows the global adoption of Bitcoin “continues to grow rapidly.” In Japan, the number of registered accounts holding digital assets has quadrupled, reaching over 7.9 million. This figure is particularly compelling against the backdrop of the Crypto Assets market crash, as it demonstrates that the trend of new user sign-ups has not been interrupted even during periods of severe market volatility.

As the third largest economy in the world, the development of Japan's cryptocurrency market holds significant indicative meaning. Japan is one of the first countries to establish a formal regulatory framework for cryptocurrency exchanges, with the Financial Services Agency (FSA) implementing a strict licensing system and anti-money laundering regulations for exchanges. In this highly regulated environment, the number of registered accounts has grown from about 2 million to over 7.9 million, showing a rapid increase in mainstream acceptance of cryptocurrency.

More importantly, this growth has prompted the Financial Services Agency to reconsider the long-standing ban on banks investing in digital assets like Bitcoin. Analysts at TD Cowen stated that if Japan relaxes restrictions on banks holding Crypto Assets, it will open up a potential influx of funds worth hundreds of billions of dollars. The Japanese banking system has over $10 trillion in assets under management, and even if 1% is allocated to Bitcoin, it would generate a demand of $10 billion.

The growth of users in Japan is driven by a broader global trend. Other Asian countries such as South Korea, Singapore, and Hong Kong are also accelerating the establishment of regulatory frameworks for Crypto Assets, attracting compliant exchanges and service providers. Europe's MiCA (Market in Crypto Assets) regulation provides a unified regulatory standard for the entire EU. Under the Trump administration, the United States is shifting from adversarial regulation to a constructive framework.

This global trend towards regulatory clarity paves the way for the mainstream adoption of Crypto Assets. When traditional financial institutions and retail investors no longer worry about regulatory uncertainty, the speed of capital inflow will significantly accelerate. This recent collapse of Crypto Assets has not deterred this trend; instead, it has demonstrated the resilience of the ecosystem, potentially accelerating institutional investors' decisions to enter the market.

TD Cowen predicts Bitcoin year-end target of 141,000 USD

TD Cowen analysts are optimistic about BTC, predicting that the price of Bitcoin will reach approximately $141,000 by December. This forecast is based on the cumulative effects of multiple assumptions. First is the continued deepening of institutional adoption, particularly the trend of capital inflows into Bitcoin ETFs. Second is the improvement of the global regulatory environment, which has reduced compliance risks. Third is the resilience of the ecosystem demonstrated by this cryptocurrency crash, which has bolstered investor confidence.

A rise from the current price of around $108,000 to $141,000 implies an increase of about 30%. This target is not aggressive, considering Bitcoin's historical volatility during bull market cycles, a 30% increase can be achieved within a few weeks. Key catalysts may include: specific actions by the U.S. government to purchase Bitcoin for strategic reserves, more sovereign wealth funds announcing allocations to Bitcoin, and traditional asset management giants like BlackRock and Fidelity further increasing their ETF shares.

This recent crypto assets crash actually provided these institutions with a better entry opportunity. Many institutional investors adopted a wait-and-see attitude after the Bitcoin price broke through $100,000, believing that the short-term increase was too large. The price correction after the crash and the subsequent rapid rebound proved that there is solid support above $100,000, which instilled confidence in institutional funds.