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In mid-October, the crypto market endured one of its most dramatic downturns in history which saw more than $19 billion in liquidated positions over a single 24-hour span.
At the center of the storm were two interconnected forces, excessive leverage and a sudden surge in geopolitical risk, centered on escalating U.S.-China trade tensions.
On Friday, the trigger was swift and stark: Donald Trump’s announcement of a 100% tariff on Chinese imports, coupled with China’s imposing new export controls on critical raw materials, sent shock waves through global markets. While risk assets were already under pressure, the timing and scale of this policy announcement met a crypto market stretched thin with leveraged futures positions creating a perfect storm.
The mechanics of the crash reveal just how intertwined leverage and tariffs became. At the heart of it, over-leveraged perpetual futures on exchanges were wired into mis-priced oracle feeds. That error, combined with plunging collateral valuations, triggered a volley of forced liquidations across platforms. As the underwriting infrastructure faltered, the fallout went from large to systemic, wiping out trillions in market value and leaving retail traders disproportionately exposed.
Bitcoin briefly slid below $110,000, and the broader crypto market cap plunged from more than $4.2 trillion to under $3.8 trillion. The event may now be seen as more than just a flash crash, it is a cautionary tale of how policy shocks and hidden leverage layers can collude to destabilize markets within minutes.
Compared to the crypto market of the past, today the crypto ecosystem is significantly more mature having institutional investors and sovereign funds invested. In a recent interview with Mastercard, Binance CEO Richard Teng discussed today’s crypto market stability compared to the past, “As with any asset class, we will be subject to changes in macroeconomic conditions, interest rate environment — none of the asset classes are immune to all this global environment. But if you compare to the past, we are in a very different stage of development. I mentioned crypto is the only asset class that has been embraced by retail, but for the longest time all the other categories of investors were not coming through. There was just one category of investors or traders. Market cap was much smaller in the past. Smaller market cap assets tend to be much more volatile.”
Single Largest Liquidation in History
The cryptocurrency market experienced its largest single-day liquidation, with over $19 billion in leveraged positions liquidated due to margin calls. The event affected approximately 1.6 million traders as crypto markets lost nearly $450 billion in market capitalization. Liquidations drove Bitcoin prices below $110,000, briefly touching $104,782 before rebounding back to $110,000.
The drop signifies a 14% decline from its October 6 all-time high of $126,210, pushing the asset to a five-month low compared to similar sharp retracements. At the same time, Ethereum faced a 12% drop while the rest of the market saw drops as low as 80% from their value.
Tariff Shock Ignites Global Sell-Off
Market volatility has been triggered as a response to macro economic shifts in the US. The wave of liquidations followed President Donald Trump’s announcement to renew a tariff in response to Beijing’s rare earth mineral exports, which led to 100% tariffs on Chinese imports starting on November 1st. Similarly, President Trump’s tariff announcement in April triggered a broad market sell-off, leading to a 10% decline in Bitcoin’s price over 24 hours.
The announcement sent shockwaves beyond the crypto sector. Traditional markets declined by 2.71%, while between Friday and Sunday, the crypto market capitalization contracted to $3.79 trillion from over $4.2 trillion.
Macro side volatility has been a prevailing theme in 2025. While broader crypto regulation created more concrete frameworks, tariff policies continue to serve as the main source of volatility and an increase in M2 global supply. Nonetheless, evolving regulations and geopolitical developments continue to shape crypto’s global positioning.
Structural Stress and Market Depth Collapse
Current market events expose the fragility of the cryptocurrency market infrastructure. Data highlights open interest contracted by 43%, falling from $217 billion to $123 billion on October 11. Of the $19 billion liquidations, $16.7 billion were triggered by longs and positions with 2x leverage and no stop losses.
Market depth collapsed by more than 80% across major exchanges during the steepest declines, as liquidity reached $27,000 on order books. The effects were directly correlated to market activity as they failed to secure resistance at $108,000 levels. The additional drawdown was partly the result of forced position closures that were not fully disclosed. Hyperliquid experienced the steepest single-day contraction, with open interest declining 57% from $14 billion to $6 billion as positions were forcefully unwound.
Structural vulnerability is visible with growing market complexity. As DEXs play a critical role in liquidity dynamics in DeFi, their market share has continued to increase, peaking at 23.1% in 2025. As such, while DEX infrastructure has improved dramatically, periods of extreme volatility still expose fragmentation and liquidity.
Cryptocurrency markets are expected to continue maturing through increased ETF participation, corporate involvement, and growing institutional adoption of on-chain products. The October 10 liquidation event, however, underscores the market’s fragility and highlights how surging volumes can act as catalysts for volatility.
