1. The Liquidation Cascade

​This is the main driver of rapid crypto crashes. When the price drops to a certain level, traders who borrowed money to go "long" (betting the price would go up) hit their liquidation price.
​The exchange's automated risk engine takes over.
​It forcefully sells their crypto at market price to cover the debt.
​This forced selling pushes the price down further, hitting the next batch of liquidation prices.
​This creates a domino effect that can drop prices by 10% or more in minutes.

​2. The Stablecoin Premium
​During a heavy sell-off, everyone rushes out of volatile assets (like Bitcoin or Ethereum) and flees into stablecoins like USDT or USDC. Because of the sudden mass demand, stablecoins will often trade at a slight premium (e.g., $1.01 or $1.02) on decentralized exchanges because everyone is competing for safety at the exact same moment.

​3. Funding Rates Reset
​If the market has been heavily "long" and optimistic, funding rates (the fee long traders pay to short traders to keep the perpetual futures price tied to the spot price) will be deeply positive. A massive flush tonight will completely wipe those rates out, turning them flat or even deeply negative as panicked traders flip to shorting the market.
​The Reality Check: The crypto market loves to hunt liquidity where it hurts the most people. Often, a "bloody night" features a massive, terrifying spike downward that instantly liquidates over-leveraged longs, followed by an equally aggressive bounce back up once the forced selling stops.