A $131 Billion Crypto Crash Has Traders Fearing Lasting Damage

(Bloomberg) -- The altcoin casino blew up in speculator fashion last week — and it’s not clear the gamblers are coming back. 

The crash didn’t just hit Bitcoin. It vaporized entire ecosystems of speculative tokens that had promised generational wealth through viral memes, big-name branding, and blind faith in momentum.

Bitcoin fell 13% after a fresh US-China tariff spat. But the damage was far deeper in smaller tokens, many of which fell as much as 80% before a tentative recovery. Trump’s memecoin, promoted earlier this year by US President Donald Trump, fell 37% on Friday, according to CoinMarketCap. World Liberty Financial Inc.’s WLFI token, also affiliated with the Trump family, plunged by a similar clip.

Of the $380 billion erased, about $131 billion came from altcoins, according to 10x Research — a sector built on thinner liquidity, speculative narratives, and day-trader hype. 

The crash raises doubts about the future of the altcoin ecosystem. Traders and market makers see structural support for these tokens eroding, with fewer buyers and rising risk aversion. The episode — unprecedented in speed and scope — threatens to mark a decisive break from a go-go era when anonymous projects could spike 1,000% with no rhyme or reason.

As researchers at Arca put it, casual observers watching global markets may have missed it. But “if you’re a fully on-chain crypto degenerate trader, however, you witnessed armageddon.”

Altcoins encompass a broad swathe of digital assets, excluding Bitcoin and Ether. These include memecoins pegged to popular trends on social media, such as the shiba inu breed of dogs, a cartoon frog named Pepe and even a real-life hippo named Moo Deng.

These kind of coins were hit hardest on Friday and early Saturday. The selloff began as risk appetite across markets weakened, but altcoins fell harder due to their inherent fragility. Many are thinly traded, lack real buyer depth, and rely heavily on a small group of players to stabilize prices. When selling pressure intensifies, those buyers often pull back, leaving tokens exposed to rapid price moves. Without strong fundamentals or sustained demand, price discovery tends to unravel quickly.

Yet, despite being thinly traded compared with Bitcoin and Ether, they had grown to command a large share of the market. Bitcoin’s share of the total crypto market fell from almost 65% in July to 58.5% currently, according to CoinMarketCap. 

The shift matters. Bitcoin’s dominance has historically collapsed before major industry drawdowns, from 70% in 2019 to 38% in late 2022 just ahead of last big wipeout — before rebounding as capital fled back to safer digital assets. 

Now market participants expect another such turn, with a long freeze for niche digital assets. That’s not just because many traders saw their portfolios obliterated last week, but because so few coins had proved profitable even before the recent carnage. 

“The problem with alt coins is, yes, they can go up more,” said Morten Christensen, a trader who runs AirdropAlert.com. “But they can go -50% in a day or -90% in a week. I am not going to play that game with my portfolio late in the cycle when the odds keep increasing that the end is here.”

The Trump memecoin is down nearly 78% since it debuted in January, with much of that decline happening before the crash, according to CoinMarketCap. XRP, the world’s fifth-biggest coin, is trading at around the price where it started off in January.

Others, like Binance-linked BNB, which is up 81% for the year, have become rare outliers.

“These assets in particular have been subject to a considerable amount of risk, as we saw this weekend, yet have been broadly underperforming large-cap crypto assets, equities and gold,” said Needham & Co. analyst John Todaro. “In short, taking on significantly more risk for what has been less reward.”

Given the scale of losses hitting the day-trader class, Evgeny Gaevoy, Wintermute’s chief executive officer, puts it bluntly: “the alt coin market will shrink.”

More stories like this are available on bloomberg.com

©2025 Bloomberg L.P.