Crypto crash driven by traditional finance events

The recent crash in the cryptocurrency market resulted in over $2 billion in liquidations, primarily attributed to events within traditional finance (TradFi), according to Evgeny Gaevoy, CEO of Wintermute.

On February 3, the crypto market saw approximately $2.24 billion liquidated within a single day, following U.S. President Donald Trump’s announcement of import tariffs on goods from China, Canada, and Mexico.

Gaevoy emphasised that the recent downturn is not due to actions by crypto insiders but rather linked to external TradFi events.

“Understanding that our little crypto market is now very directly linked to the real world outside is pretty essential to being a (more) successful trader,” he stated.

This sentiment was echoed by analysts who noted that fears of a potential global trade war have significantly impacted investor confidence.

Ryan Lee, chief analyst at Bitget Research, remarked that the downturn is largely driven by escalating concerns over these geopolitical tensions.

Investor anxiety deepened after Bybit CEO Ben Zhou suggested that liquidations could exceed $10 billion, a stark increase compared to previous estimates.

In light of the market turmoil, some traders speculated that large crypto firms might have intentionally sold off assets to trigger price drops for opportunistic buying.

In response to these allegations, Gaevoy clarified that Wintermute does not engage in price manipulation or illegal activities.

“We don’t ‘hunt for stop losses,’” he asserted, and explained that their trading activities primarily involve moving inventory between exchanges.

Market makers play a crucial role in providing liquidity but can also contribute to selling pressure during downturns.

Despite the recent volatility, Gaevoy highlighted the importance of recognising the interconnectedness of crypto markets with broader economic events.