DRW says exchanges failed neutrality test as crypto markets crashed

Donald R. Wilson, the founder of DRW Holdings LLC, called out crypto exchanges on Friday for violating one of the most basic principles in trading; neutrality.

Speaking from Chicago just a week after the brutally historic $19 billion liquidation that wiped out leveraged bets after Trump reignited beef with China, Wilson reportedly told Bloomberg that if crypto wants to be taken seriously by institutional players, exchanges can’t keep acting like they’re both the referee and the player.

“If crypto markets aspire to institutional credibility, then exchanges need to be just that: neutral venues for trading,” he said.

Wilson didn’t name names, but we believe his message hit home. He accused some platforms of injecting their own liquidity into trades, both during normal hours and in the middle of chaos, something that’s completely separated in traditional finance.

“In traditional finance, that’s a bright line,” said Wilson. “In crypto, it’s often blurred, and that’s a problem.”

Exchanges halted deposits as traders scrambled to stay afloat

Wilson said some platforms not only blurred the lines, they outright shut them down. He claimed certain exchanges suspended deposits during the selloff, preventing traders from adding funds to meet margin calls, which would be “unthinkable” in any well-run financial system.

“That’s the kind of operational fragility that must be fixed for TradFi to function on these new rails,” Wilson explained. While Cumberland kept trading throughout the crash, others were left stuck without a way to defend their positions.

The absence of futures commission merchants, or FCMs, in crypto was another issue Donald raised. In traditional setups, FCMs stand between traders and exchanges; softening the blow when volatility hits.

Without them, Wilson warned, there’s no buffer. “Most crypto platforms don’t have this type of FCM-like buffer in the mix, which makes this approach far more challenging,” he said. “Positions are marked and liquidated instantly, and when liquidity dries up, there’s no intermediary capital to cushion the shock, as we saw last week.”

During the crash, around $131 billion was lost from altcoins alone, pulled down by fear, thin order books, and automated trading systems. At one point, $7 billion evaporated in just sixty minutes. From New York to Singapore, traders were crushed as automated liquidation bots flooded the order books without a human in sight. As one research team described it, “If you’re a fully on-chain crypto degenerate trader, you witnessed armageddon.”

Bitcoin dominance fell while altcoins collapsed under pressure

The impact stretched beyond just price charts. Bitcoin’s share of the total crypto market slipped from nearly 65% in July to 58.5%, based on data from CoinMarketCap.

That change matters, every time Bitcoin dominance drops ahead of a crash, chaos usually follows. It happened in 2019, when dominance fell from 70% to 38% just before another massive wipeout. That pattern repeated in 2022, and now again in 2025.

After the dust settles, dominance usually rebounds as investors retreat into safer assets. This time, the broader market shed roughly $380 billion, erasing weeks of gains. Liquidity dried up. Narratives lost steam. Day traders watched as altcoins spiraled.

With no circuit breakers and no one on the other side of the trade, automated systems ran wild. The same plumbing that keeps crypto markets running 24/7, also made sure that once prices started falling, the losses didn’t slow down.

Margin calls were executed by bots, not brokers. Collateral was liquidated on sight. There was no mercy, no delay, no room to react.

A technical glitch on Binance exacerbated the selloff, and the exchange later said it paid $283 million in compensation to affected users. It said the glitch didn’t cause the market crash.

“Hyperliquid is a blockchain where every order, trade, and liquidation happens onchain,” Jeff Yan, the platform’s co-founder, said in an X post later on. “Anyone can permissionlessly verify the chain’s execution, including all liquidations and their fair execution for all users.”

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