When crypto collapses

It would be strange to publish Open Money this week without acknowledging what just happened.

Prices fell sharply and at historic rates, with bitcoin and ether posting some of their worst weekly performances in recent history according to aggregated market reporting: Bitcoin slid through levels that hadn’t been tested in months, ether dropped even harder, while crypto-linked equities sold off alongside technology stocks.

By most conventional measures, this was one of the roughest weeks the crypto market has seen in some time, and maybe given all of the conversations about where crypto fits in an institutional portfolio and whether or not bitcoin’s four-year cycle is dead or not, the weight of the crash felt different. 

But the more interesting question isn’t why prices fell. It’s how they fell — and what that says about where Open Money now sits in the broader financial system.

Because what played out this week didn’t look like an isolated crypto unwind. It looked like a familiar kind of financial stress, moving through channels that are no longer unique to crypto at all. And, if there is a silver lining in the carnage of the past week, it's that crypto markets handled the stress from a technology perspective (at least as far as we know so far).

This wasn’t a closed-loop crypto event

Several of the headlines made this clear. For example, broader market reporting from the Associated Press noted bitcoin moving alongside tech stocks during the sell-off, while Yahoo Finance highlighted heavy outflows and volatility tied to bitcoin-linked ETFs.

Bitcoin moved in step with broader risk assets. Tech stocks declined alongside crypto prices while retirement accounts with crypto exposure felt the impact. ETFs and derivatives amplified moves rather than insulating them while retail and institutional flows reacted at the same time.

In other words, crypto no longer sold off on its own terms in its own isolated bubble market.

It sold off through the same feedback loops that shape other financial markets: leverage, liquidity, sentiment, and correlation. And, if nothing else, markets that function properly can be ruthlessly efficient.

That’s a meaningful shift from how crypto behaved in earlier cycles, when volatility often stemmed from internal failures, idiosyncratic shocks, or crypto-centric headlines. This time, the drawdown propagated through integrated financial channels. For the good or the bad, it felt like the risk was everywhere.

Where the pressure actually came from

Much of the reporting this week focused on proximate explanations, things like ETF flows, leveraged positions, hedge fund exposure, and retail capitulation signals, including analysis of derivatives-driven liquidations and retail sentiment shifts.

Those details matter, but they point to a broader pattern.

The stress showed up where crypto is now deeply entangled with traditional financial infrastructure:

• derivatives tied to spot products
• ETFs acting as transmission layers
• funds managing crypto alongside equities
• retirement products expanding access
• centralized and onchain venues clearing risk simultaneously

What strained wasn’t blockchains or protocols. It was the system’s capacity to absorb rapid repositioning at scale. That’s not a uniquely crypto problem, in other words, it’s a feature of markets once they become widely accessible.

What actually failed — and what didn’t

It’s worth being precise here.

This week did not expose a breakdown in the underlying rails. During the rapid drawdown, transactions settled, wallets worked, and onchain markets continued to function. There was no single operator pulling a lever or halting activity across the system.

The volatility lived above the rails (in the actual markets) not inside them (at the level of the tech).

What faltered was confidence and leverage tolerance. Positions that assumed stability were unwound quickly, which meant liquidity thinned where it was needed most.

Open Money transmits stress efficiently

One of the recurring assumptions about crypto has been that openness dampens fragility. That permissionless access, self-custody, and composability somehow reduce systemic risk.

This week suggests something more nuanced.

Open Money does not eliminate volatility, if anything it might make volatility more pervasive. The openness of Open Money means that volatility is transmitted more efficiently.

In a lot of ways, the same principles that make Open Money resilient also have an element of brutality. When access is broad, speedy exits are broad. When liquidity is shared, stress travels quickly. When markets interoperate, feedback loops tighten, ultimately leading to quick unwinds. 

These are not flaws. They are properties of open systems once participation expands. And of course, when market conditions are favorable, this also leads to the big upside events that are also historic in their own way.

What this week demonstrated is that crypto markets now behave less like experimental sandboxes and more like fully integrated financial venues — complete with reflexivity, leverage, and crowd behavior, all at scale.

Why price levels matter less than behavior

It’s tempting to anchor on numbers: how far prices fell, which support levels broke, how large the liquidations were. If you hold positions in crypto assets, this kind of thinking is normal, I mean how can you not think that way.

From a research perspective, those details become less important to the broader picture.

The primary signal is that crypto’s market dynamics now mirror those of other large financial systems. Capital moved out, then partially back in, market sentiment swung rapidly (and is still swinging), while derivatives magnified moves.

Once assets are held in retirement plans, traded through ETFs, and allocated by global funds, they inherit the same cyclical behavior as everything else.

This week didn’t mark crypto’s failure to decouple. It confirmed that decoupling is no longer the right lens. For as much as some politicians and media pundits would like to still pretend that crypto is fringe and should be relegated to the far corners of the internet, this week showed that crypto is part of the tangled web of the global financial system.

What this means for the Open Money thesis

If Open Money is about permissionless access, composability, and continuous settlement, then weeks like this are not anomalies.

They show what happens when open rails carry meaningful volume and risk, a set of conditions that will likely only continue to get magnified as the markets and crypto systems continue to mature. They reveal where leverage concentrates and hey expose how quickly sentiment can propagate when barriers are low.

They also clarify where resilience actually lives.

The rails did not stop, the system did not freeze, and there was no central switch to flip.

Volatility played out in prices and positions, not in the ability to move value.

That’s an important distinction for how we think about the future of Open Money.

Research backlog

This week surfaces several questions worth tracking more closely:

• How does Open Money behave once most exposure is indirect, routed through ETFs, funds, and retirement products? 
• Where does leverage concentrate in an open, composable financial stack?
• Does composability amplify systemic stress, or does it eventually help absorb it?
• Which layers feel pressure first during large drawdowns: markets, interfaces, or liquidity providers?

Sure, these questions are top of mind right now after the historic flush of last week, but zooming out, they are really questions about how Open Money as it continues to scale.

Closing thought

This week wasn’t a referendum on whether crypto works.

It was evidence that Open Money is now part of the same financial weather system as everything else — subject to the same cycles, emotions, and structural pressures.

Markets didn’t treat it as separate and despite this week's losses, maybe that's a good thing.

If this framing is useful, subscribe or reply. I’m especially interested in which parts of the stack you think this week stressed the most — and which ones surprised you by holding up.