On March 12, the crypto market faced two massive downward moves, about 13 hours apart, leading to Bitcoin briefly crashing below $4,000—the worst single-day drop in seven years.

The first leg down, around 25%, occurred early in the morning and was relatively orderly. This was likely caused by traders de-risking as global stock markets were also experiencing a selloff. However, the second drop, in the evening, shattered the market structure. This time, the downward spiral was triggered by a lender liquidating collateral from insolvent borrowers impacted by the first drop. The situation worsened when some miners shut down their rigs, with even more doing so after the second leg down.

As the market structure broke, the situation spiraled out of control on BitMEX. Since BitMEX accepts only BTC as collateral, traders going long BTC-USD with leverage faced cascading liquidations as the price plummeted. As liquidity providers withdrew during the volatile price action—especially with spreads exceeding $500 between BitMEX and Coinbase—the selloff intensified. This led to a complete market collapse, with liquidity drying up and Bitcoin crashing to historic lows for a brief moment.

The series of liquidations on leveraged positions, combined with the withdrawal of liquidity providers, created a perfect storm, marking a day of chaos in crypto history.