JPMorgan analysts claim that crypto-native traders, rather than institutional and retail ETF investors, were primarily responsible for the recent crypto market crash.
The precipitous collapse, characterized by massive liquidations, resulted from extensive deleveraging in perpetual futures markets—a favored location among experienced participants in the cryptocurrency market.
Native Traders at the Core of the Crash
According to a study by a research group headed by Nikolas Panigirtzoglou of JPMorgan, the data of perpetual futures indicate a major deleveraging event. They were offensive instruments and were widely utilized by offshore and unregulated traders, who experienced a significant reduction in open interest. Institutional investors in Bitcoin and Ethereum, who invested in ETFs or CME futures, proved to be much more resilient in the face of the selloff.
The outflows in the spot Bitcoin ETFs amounted to only 0.14% of assets under management at a time when the funds showed outflows of $220 million between October 10 and October 14. The withdrawals were primarily in Ethereum ETFs, amounting to $ 370 million, which represents $1.23 of the assets. According to analysts, these numbers suggest that ETF investors did not panic and were not among the sellers.
Institutional Players Remain Steady
One of the most important mediums of trade for institutional traders, CME Bitcoin futures, had to deal with smaller liquidations. The level of activity in CME Ethereum futures increased somewhat, yet JPMorgan attributed this mainly to algorithmic and quantitative strategies reducing exposure to increased volatility. This report implied that abrupt price fluctuations were no longer the responsibility of the traditional market players. That position, according to JPMorgan, has returned to crypto-native traders who trade in less-regulated offshore markets.
The decline in perpetual futures open interest was even greater than the drop in the spot market, which fell by a factor of almost 40% in dollar terms. It means that the most leveraged traders had to sell off, thus increasing the selloff. Coinglass reports that the fix on October 11 cost over $20 billion in long positions for 1.5 million traders, marking the largest liquidation event in crypto history.
Leverage and Geopolitics Deepen the Drop
Geopolitical tensions aided the turmoil. The reaction to President Donald Trump’s announcement of 100% tariffs on Chinese technology imports was a massive sell-off in significant risk assets. Bitcoin dropped to around $106,000 and then stabilized at around $108,500 by Friday, down over 2.5% in the 24 hours.
Outlook and Market Stability
Despite the turbulence, JPMorgan observed that long-term investors had not been significantly affected. The flows of institutional ETFs remained consistent, and on-chain data showed no substantial transfer of cold funds or custodial accounts. The bank emphasized that the recent pain was not caused by long-term investors, but rather by leveraged speculators.
Analysts cautioned that the market’s mood is weak. The incident made news of leverage- and momentum-based trading in cryptocurrency markets. Volatility is likely to continue until there is more institutional control in offshore exchanges. The question that investors are now pondering is whether Bitcoin can maintain its current level of over 100,000 and whether leveraged bets will begin to accumulate in the next few weeks.
