Author: Wintermute; Translation: Jinse Finance xiaozou Last Friday, the United States announced a 100% tariff on all Chinese imports, effective November 1st, triggering a risk-off wave across major markets. The S&P 500 fell 2.9%, the VIX index soared from 16 to 22, and the 10-year yield fell from 4.14% to 4.05%. Investors de-risked and shifted to defensive positions, driving gold prices higher. Digital currencies also suffered a significant blow, with total open interest reaching $220 billion before the incident. Within hours, $19 billion in leveraged positions were liquidated, setting a record for the largest single-day margin call in history. Below are our observations on the spot perpetual swap and options markets. 1. Spot Market: Based on aggregated data from centralized exchanges, we observed a rapid and synchronized sell-off. Most trading pairs on centralized exchanges bottomed out within 55 minutes (between 20:40 and 21:35 UTC). The dramatic price fluctuations quickly depleted overall market liquidity. As prices recovered from the lows, liquidity quickly returned. Based on aggregated exchange data for the top 50 cryptocurrencies, we observed the following: 1. The median retracement reached -54%, with over 90% of tokens experiencing declines exceeding 10%. BTC (-11%) and ETH (-13%) demonstrated the strongest resilience, while small and mid-cap assets experienced declines of 60-80% at their peak. 2. Amidst the global liquidation wave, nearly all tokens bottomed out around 21:20 UTC, followed by a sharp rebound as forced sell-offs closed, averaging an 84% rebound within 30 minutes. 3. Losses were negatively correlated with market capitalization: Based on the GMCI30 index, large-cap tokens saw an average decline of approximately -27%, while small-cap tokens saw an average decline of -52%. Order book conditions returned to normal within an hour, with funds flowing back to BTC, ETH, and major layer-one tokens. Small-cap tokens lagged in their rebound. 4. The overall order book depth on centralized exchanges dropped by approximately 65% during the trough, but as quote frequency and spreads returned to normal, it recovered to over 90% of pre-event levels within 35 minutes. While liquidity was provided during this period, the spread between the quote and the mid-price widened significantly. 2. Options Market: After the US tariff policy triggered market panic on Friday, BTC futures positions quickly shifted to a defensive stance, with traders scrambling for downside protection, pushing total options volume to a record high. Data covers 24 hours of activity during the period of tariff headlines and the market sell-off. Panic hedging dominated capital flows, with short-term put options actively bid. By Saturday, market sentiment shifted, and as BTC stabilized around $115,000, trading strategies shifted to volatility harvesting and range trading, profiting from selling call options and shorting calendar spreads. Volatility surged due to safe-haven demand, with implied volatility jumping 20-25 basis points between July 7 and 14. Put options with strike prices between $105,000 and $115,000 saw a 10-15 volatility basis point premium relative to call options, marking one of the largest single-day front-end surges on record. Options trading volume reached a new high, primarily concentrated in October expiring contracts, with approximately 70% of premiums flowing into put options below $115,000, highlighting strong demand for downside protection. Deribit's 24-hour trading volume doubled its previous record. On Saturday, fund flows reversed to volatility selling, with traders selling call options and straddles in the $118,000-$130,000 range, pushing one-week implied volatility down from 63% to 51%, indicating that the market quickly interpreted the tariff impact as a short-term disturbance. 3. Perpetual Swaps Market: Friday's market crash tested both centralized and decentralized perpetual swaps to their limits, with hundreds of millions of dollars in leveraged positions liquidated within minutes. Centralized exchanges experienced record liquidation volumes and a temporary liquidity gap, while on-chain DEX perpetual swaps faced significant pressure on their clearing systems and treasuries. However, major DEX platforms remained operational and solvent throughout. This incident served as a real-world stress test of the resilience of on-chain trading and margin systems. Some users engaged in long-short spread strategies experienced automatic liquidation of their short positions, temporarily shifting their positions away from neutral. Subsequently, as prices continued to fall, their long positions were liquidated. Over 1,000 wallets on the Hyperliquid platform were automatically deleveraged, a possible contributing factor to the cascading liquidations. Take HYPE, for example, which suffered the heaviest liquidation on the entire network, reaching $10.3 billion. This liquidation triggered the first cross-margin auto-deleveraging (ADL) event on a major DEX perpetual contract platform. This mechanism mitigates risk by partially closing profitable positions when the reserve fund pool is depleted. Gas usage soared to a record high of 105,000, approximately three times the daily average since March and exceeding the previous record by more than double, reflecting the surge in on-chain liquidations and trading activity during the event. Looking at the situation on centralized exchanges: Open interest suffered a severe blow, with most contracts shrinking by approximately half during the plunge, reflecting a comprehensive leverage impact. Funding rates turned sharply negative, a mechanical fluctuation driven by liquidations rather than position adjustments. After only a partial recovery over the weekend, funding rates for most of the top 100 tokens remain below average. All of this serves as a reminder that risk management and leverage control are crucial in the cryptocurrency market, and we must be prepared for unexpected events.
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