JPMorgan identified “crypto-native investors” as the primary force behind the latest crypto sell-off. Bitcoin dropped to about $108,000 as more than $20 billion in leveraged positions were liquidated. The bank’s view shifts attention away from large institutions or ETF selling and toward the behavior of derivatives traders, prompting risk, product, and compliance teams to focus on internal market dynamics.
JPMorgan, led by Nikolaos Panigirtzoglou, argues the decline was driven by overleveraged crypto-native traders forced to sell. The bank rules out a broad institutional exit and downplays the role of spot ETF flows, reframing the episode as a leverage-driven unwind within derivatives markets.
Open interest in Bitcoin alongside Ethereum perpetual contracts fell by roughly 40%, a drop far steeper than the price move, a pattern consistent with forced position closures.
ETF flow data were too small to explain the scale of the plunge, with Bitcoin ETFs losing about $220 million (around 0.14% of assets) and Ethereum ETFs around $370 million (about 1.23% of assets). On the CME, Bitcoin futures saw modest forced sales while Ethereum futures experienced heavier unwinds, which the note links to trend-following funds and quant strategies.
A single macro headline — a presidential tweet on tariffs — triggered liquidations across already fragile, highly leveraged books, sparking a chain reaction that hit more than 1.5 million accounts according to JPMorgan.
Derivatives platforms must scrutinize leverage more closely
As heavy borrowing can drain liquidity and heighten counterparty risk during shocks. Product teams should implement circuit breakers and safeguards that limit cascading liquidations when volatility spikes.
Compliance teams need to update risk models to account for native trader-driven dislocations rather than relying solely on ETF flow signals. For institutional investors, the episode underscores that ETF flows may diverge from stress building in the derivatives arena, complicating traditional read-throughs of market health.
Near term, the market will watch ETF flows alongside the size of open interest in derivatives, while observers track JPMorgan’s own digital asset efforts, including its “JPMD” trademark and related projects. The lesson is clear: the weak point lay inside the market’s leverage structure, not in a mass institutional exit, and platforms must tighten leverage and liquidity controls accordingly.
