Reviewing the history of cryptocurrency market crashes: every panic is said to be the last one

Author: ChandlerZ, Foresight News

In April 2025, the crypto market once again fell into turmoil. The Trump administration unleashed tariffs, causing a sudden shift in global financial market sentiment. Bitcoin dropped more than 10% in two days, while Ethereum plummeted by as much as 20%, with liquidation amounts reaching as high as $1.6 billion within 24 hours. Just like several previous historic crashes, this scene triggered collective anxiety: "Is this the end, or the beginning of a new collapse?"

However, if we review the history of the crypto market, we will find that this is not the first time everyone feels "this time it's over." In fact, every instance of extreme panic is merely a unique ripple in the asset curve. From "312" to "519," from the global financial panic in 2020 to the "crypto Lehman moment" triggered by the collapse of FTX's credit, and now to this tariff crisis.

The market's script keeps repeating, while investors' memories are always short.

This article will reconstruct the "market scene" of the previous four historic crashes based on real data, comparing dimensions such as price drops, sentiment indicators, and macro backgrounds, attempting to extract a traceable and predictive pattern from these extreme moments: how does the crypto market withstand pressure when risks arise? How does it repeatedly reshape its narrative amid systemic shocks?

Overview of Historic Crashes: Familiar Scripts, Different Triggers

In the past five years, the crypto market has experienced at least four systemic crashes. Although the backgrounds triggering each were different, they all led to severe price adjustments and chain reactions both on-chain and off-chain.

From the data, "312" remains the most brutal crash in history, with BTC and ETH both dropping over 50% on that day. The total liquidation amount across the network reached $2.93 billion, with over 100,000 people facing liquidation, and the largest single liquidation order valued at $58.32 million. The scale of this liquidation indicates that market participants were generally using high leverage (such as 10 times or even higher), and when prices fell rapidly, the forced liquidation mechanism was triggered, further exacerbating selling pressure and creating a vicious cycle.

At the same time, the dramatic operation of BitMEX "pulling the plug" and halting trading exposed the fragility of market liquidity. Other trading platforms also fell into chaos, with the cross-platform price difference for Bitcoin reaching as high as $1,000, and arbitrage bots failing due to trading delays and API overload. This liquidity crisis led to a rapid shrinkage of market depth, with buy orders nearly disappearing and selling pressure completely dominating the situation.

As the platform with the largest short position at the time, BitMEX's trading halt effectively became a "lifeline" that prevented Bitcoin's price from completely hitting zero. If BitMEX had not interrupted trading, its depleted depth could have caused prices to plummet close to zero, further triggering a chain collapse on other platforms.

The Domino Effect Under a Black Swan

"312" was not an isolated phenomenon in the crypto market, but a microcosm of the global systemic financial crisis in early 2020.

Panic Crash in Global Stock Markets

Since the Nasdaq index hit a historic high of 9,838 points on February 19, 2020, market sentiment plummeted as the COVID-19 pandemic spread globally. Entering March, U.S. stocks experienced rare circuit breakers, triggering the circuit breaker mechanism three times on March 9, 12, and 16. On March 12, the S&P 500 index fell by 9.5%, marking the largest single-day drop since "Black Monday" in 1987, with the VIX panic index soaring to a historic high of 75.47. Meanwhile, the three major European stock indices (Germany, UK, France) and the Asia-Pacific markets (Nikkei, Hang Seng) also entered technical bear markets, with at least 10 countries' stock indices dropping over 20%.

The systemic sell-off in global capital markets quickly spread to all risk assets, with cryptocurrencies like Bitcoin and Ethereum also facing indiscriminate selling, leading to a sharp decline in market risk appetite and the formation of a "financialization resonance" where cryptocurrencies and traditional assets were highly synchronized.

Bloodbath in the Commodity Markets

The traditional commodity market also faced a comprehensive collapse during this crisis. On March 6, 2020, OPEC and Russia failed to reach an agreement on production cuts, prompting Saudi Arabia to launch a price war, announcing increased production and lowering oil prices, which triggered a global energy market crash. On March 9, U.S. crude oil (WTI) plummeted by 26%, marking the largest drop since the Gulf War in 1991; by March 18, WTI fell below $20. The uncontrolled plunge of oil, the "blood of the global economy," intensified investors' fears of a deep recession in the global economy.

Additionally, commodities such as gold, copper, and silver also saw significant declines, indicating that "traditional safe-haven assets" struggled to hedge against market downturns in the early stages of the crisis, leading to a gradual escalation of liquidity panic.

Dollar Liquidity Crisis and the Paradox of Safe-Haven Assets

As global asset prices collectively fell, the dollar liquidity crisis quickly emerged. Investors rushed to sell various assets for cash, pushing the dollar index (DXY) sharply up from 94.5 to 103.0 in mid-March, reaching a three-year high. This "cash is king" phenomenon led to indiscriminate selling of all risk assets, and Bitcoin was no exception.

This was a crisis characterized by liquidity contraction, credit deconstruction, and emotional stampedes, where the boundaries between traditional and crypto markets were completely blurred.

Policy Hammer: The Chinese Crackdown Storm in May 2021

In May 2021, the crypto market suffered a heavy blow. After hitting a historic high of $64,000 in early May, Bitcoin's price halved to $30,000 in just three weeks, with a maximum drop of over 53%. This crash was not due to a systemic failure on-chain, nor was it directly impacted by the macroeconomic cycle; its main cause was a series of high-pressure regulatory policies issued by the Chinese government.

On May 18, the Financial Stability Development Committee of the State Council of China explicitly stated the need to "crack down on Bitcoin mining and trading activities." The next day, several provinces began to implement targeted mining rectification measures, including Inner Mongolia, Qinghai, and Sichuan, which are major computing power clusters. A large number of mining farms were forced to shut down, and computing power rapidly withdrew from the global network, leading to a nearly 50% decline in Bitcoin's total network computing power within two months.

At the same time, domestic trading platforms faced scrutiny of their bank account interfaces, and OTC channels tightened, creating pressure for funds to flow back. Although mainstream exchanges had gradually exited the Chinese market since 2017, the "policy pressure" still triggered risk-averse sentiment among global investors.

On-chain, the block interval for miners significantly increased, with single block confirmation times soaring from 10 minutes to over 20 minutes, causing network congestion and skyrocketing transaction fees. Meanwhile, market sentiment indicators plummeted, with the crypto fear and greed index entering the "extreme fear" zone, as investors' concerns over the continuous escalation of policies became the dominant force in the short term.

This round of crashes marked the first time the crypto market faced a confidence reconstruction process triggered by "national-level suppression." In the long run, the migration of computing power unexpectedly promoted the rise of North America's share of computing power, becoming a key turning point in the geographical pattern of Bitcoin mining.

Systemic Chain Collapse: The Terra/Luna and DeFi Trust Crisis

In May 2022, the algorithmic stablecoin UST of the Terra ecosystem depegged, triggering a "Lehman moment" in the decentralized finance world. At that time, Bitcoin had slowly retreated from its early-year price of $40,000 to around $30,000, and as the UST mechanism failed, the price of Luna dropped to zero within a few days, causing the DeFi ecosystem to rapidly become unbalanced, with BTC's price further plummeting to $17,000, and the entire adjustment period lasting until July, with a maximum drop of 58%.

UST was originally the largest algorithmic stablecoin by market capitalization in the crypto world, relying on Luna as collateral for its stability mechanism. When the market began to question UST's stability, panic quickly spread. From May 9 to 12, UST continued to depeg, and Luna's price plummeted from $80 to below $0.0001, leading to the collapse of the entire ecosystem within five days.

Due to the Luna Foundation Guard previously using over $1 billion in Bitcoin reserves to support UST's exchange rate stability, but ultimately failing to prevent the collapse, this portion of BTC assets further exacerbated market pressure during the sell-off. Meanwhile, many DeFi projects in the Terra ecosystem (Anchor, Mirror) saw their on-chain TVL drop to zero, resulting in significant losses for users.

This collapse triggered a chain reaction: the large crypto hedge fund Three Arrows Capital (3AC) held substantial UST and Luna-related positions, and after the explosion, its funding chain broke; subsequently, several CeFi lending platforms such as Celsius, Voyager, and BlockFi also faced bank run crises, ultimately entering bankruptcy proceedings.

On-chain performance saw a sharp increase in ETH and BTC transaction volumes as investors attempted to withdraw from all high-risk DeFi protocols, leading to a drastic decline in the depth of multiple on-chain liquidity pools and skyrocketing DEX slippage. The entire market entered a state of extreme panic, with the fear and greed index dropping to its lowest level in recent years.

This was a "global correction" of the trust model within the crypto ecosystem, shaking the feasibility expectations of "algorithmic stablecoins" as a financial hub, while prompting regulators to redefine the risk scope of "stablecoins." Subsequently, stablecoins like USDC and DAI gradually emphasized collateral transparency and auditing mechanisms, with market preferences clearly shifting from "yield incentives" to "collateral security."

Trust Collapse: The Off-Chain Credit Crisis Triggered by the FTX Explosion

In November 2022, the centralized exchange FTX, hailed as the "anchor of institutional trust," collapsed overnight, becoming one of the most impactful "black swan" events in crypto history after Mt. Gox. This was a collapse of internal trust mechanisms, directly striking at the credit foundation of the entire crypto financial ecosystem.

The incident began with a leaked Alameda balance sheet, revealing its substantial holdings of its own platform token FTT as collateral, raising widespread doubts about asset quality and solvency. On November 6, Binance CEO Changpeng Zhao publicly announced plans to sell his FTT position, causing the price of FTT to plummet and triggering a panic withdrawal wave among off-chain users. Within 48 hours, the FTX platform fell into a liquidity crisis and was unable to meet customer withdrawals, ultimately filing for bankruptcy protection.

The FTX explosion directly pulled down Bitcoin's price from $21,000 to $16,000, with a drop of over 23% within seven days; Ethereum fell from around $1,600 to below $1,100. The liquidation amount within 24 hours exceeded $700 million, and although it was not as large as "312," the trust loss far exceeded what a single price drop could reflect, as this crisis occurred off-chain and affected multiple mainstream platforms.

On-chain, the exchange volumes of USDT and USDC surged as users rushed to withdraw from exchanges and transfer assets to self-custody wallets. The number of active addresses in cold wallets reached an all-time high, and "Not your keys, not your coins" became the main theme on social media. Meanwhile, the DeFi ecosystem remained relatively stable during this crisis, with on-chain protocols like Aave, Compound, and MakerDAO not experiencing systemic risks, reflecting the preliminary validation of decentralized architecture's resilience under pressure.

More significantly, the collapse of FTX prompted global regulatory agencies to reassess the systemic risks in the crypto market. The U.S. SEC, CFTC, and financial regulators from multiple countries launched investigations and hearings, pushing compliance topics such as "exchange transparency," "proof of reserves," and "off-chain asset audits" to the mainstream agenda.

This crisis was no longer merely "price-level fluctuations," but a comprehensive handover of the "trust baton." It forced the crypto industry to return from superficial price optimism to fundamental risk control and transparent governance.

Systemic External Pressure Triggered by the 2025 Tariff Crisis

Unlike internal crises in the crypto industry such as the FTX explosion, the recent market crash triggered by Trump's imposition of "minimum baseline tariffs" once again showcased the global characteristics reminiscent of the "312" period. It was not the collapse of a single platform or the loss of control over a specific asset, but a systemic financial panic triggered by macro-level geopolitical conflicts, drastic changes in global trade structures, and uncertainties in monetary policy.

On April 7, U.S. stocks continued to open lower, with tech and chip stocks suffering heavy losses; Nvidia fell over 7%, Tesla nearly 7%, Apple over 6%, and Amazon and AMD over 5%, while Intel and ASML dropped over 3%. Blockchain concept stocks also fell broadly, with Coinbase down about 9% and Canaan Technology down about 9%.

Interestingly, after news emerged that Trump was considering suspending tariffs for certain countries for 90 days, the S&P 500 index initially dropped over 4.7% before rising nearly 3.9%, the Dow Jones initially fell over 4.4% before rising over 2.3%, and the Nasdaq initially dropped nearly 5.2% before rising over 4.5%, with BTC breaking above $81,000.

Subsequently, the White House told CNBC that any talk of a 90-day suspension of tariffs was "fake news," and global capital markets turned down again. This illustrates the pressure of the Trump administration's tariff policy on global financial markets.

Traversing Multiple Crashes: Causes of Risk, Transmission Paths, and Market Memory

From "312" to the "Tariff War," several major crash events in the crypto market depict the different types of systemic pressures faced by this emerging asset class. These crashes reflect not only differences in "magnitude" but also the evolutionary trajectory of the crypto market in dimensions such as liquidity structure, credit models, macro coupling, and policy sensitivity.

The core difference lies in the "hierarchical" changes of risk sources.

The 2020 "312" and the 2025 tariff crisis are both dominated by "external systemic risks," driven by a "cash is king" sentiment, leading to collective selling of on-chain and off-chain assets, representing the extreme manifestation of global financial market interlinkages.

The FTX and Terra/Luna events reflect crises of "internal credit/mechanism collapse," exposing structural vulnerabilities under centralized and algorithmic systems; the Chinese policy crackdown represents a concentrated manifestation of geopolitical pressure, demonstrating how the crypto network passively responds to sovereign-level forces.

Beyond these differences, there are also notable commonalities:

First, the "emotional leverage" in the crypto market is extremely high. Every price correction is rapidly amplified through social media, leveraged markets, and on-chain panic behavior, creating stampedes.

Second, the risk transmission between on-chain and off-chain is increasingly tight. From the FTX explosion to the 2025 whale on-chain liquidation, off-chain credit events are no longer limited to "exchange issues," but can transmit to on-chain, and vice versa.

Third, the market's adaptability is increasing, but structural anxiety is also growing. DeFi demonstrated resilience during the FTX crisis, but exposed logical flaws during the Terra/Luna collapse; on-chain data is becoming increasingly open and transparent, yet large liquidations and whale manipulations still often trigger severe volatility.

Finally, each crash pushes the crypto market towards "maturation," not in terms of stability, but complexity. Higher leverage tools, smarter liquidation models, and more complex game roles mean that future crashes will not be fewer, but the understanding of them must be deeper.

It is worth noting that each crash has not ended the crypto market. On the contrary, it has driven deeper structural and institutional reconstruction of the market. This does not mean that the market will become more stable as a result; rather, increasing complexity often implies that future crashes will not be fewer. However, the way to understand the severe price fluctuations of such assets must be deeper, more systematic, and more compatible with the dual dimensions of "cross-system shocks" and "internal mechanism imbalances."

These crises tell us not that "the crypto market will ultimately fail," but that it must continuously seek its positioning between the global financial order, the concept of decentralization, and the mechanisms of risk games.