The Largest Crypto Liquidation in History
October 10-11, 2025, marked the darkest 24 hours in cryptocurrency history. The market experienced an unprecedented $19 billion liquidation event that forcibly closed leveraged positions and wiped out approximately 1.6 million traders worldwide. Bitcoin, which had reached an all-time high above $125,000 just days earlier, plummeted to $102,000. Ethereum crashed below $3,500, while altcoins like XRP briefly lost over 40% of their value. To put this in perspective, the October liquidation was roughly 20 times larger than the March 2020 COVID crash and dwarfed the November 2022 FTX collapse. Data tracker CoinGlass called it “the largest liquidation event in crypto history,” though analysts estimate the true figure could reach $30-40 billion when accounting for delayed exchange reporting.
The Geopolitical Trigger For The Crypto Liquidation
The catalyst came from an unexpected source: President Donald Trump’s announcement on October 10, 2025, that he would impose a 100% tariff on all Chinese imports along with export controls on critical software. This announcement, framed as retaliation for China’s restrictions on rare earth mineral exports, sent shockwaves through global markets. Within 40 minutes, the S&P 500 erased $1.2 trillion in market capitalisation. But the cryptocurrency market, operating 24/7 and heavily leveraged, became the epicentre of panic. Bitcoin fell 13% in a single hour, and the total crypto market capitalisation collapsed from $4.30 trillion to $3.74 trillion, erasing roughly $560 billion as trading volumes surged to nearly $500 billion.
What made this crash particularly devastating was its timing and hidden leverage. The liquidation occurred during weekend hours when traditional equity markets were closed and spot Bitcoin ETFs weren’t operating, meaning liquidity was reduced precisely when needed most. Additionally, traders had accumulated dangerous levels of leverage using perpetual futures contracts with up to 100x multipliers. While funding rates and sentiment indicators seemed manageable on the surface, the reality was far more precarious. Once the initial wave of liquidations began, a vicious cascade ensued where falling prices triggered automatic sell orders, which pushed prices lower and triggered more liquidations in a self-reinforcing death spiral.
The Damage Across All Cryptocurrencies
Bitcoin saw $1.37 billion in liquidations as it fell nearly 20% from its recent peak, though it performed relatively better than other assets due to deeper liquidity and institutional support. By October 13, Bitcoin had stabilised around $113,000-$115,000. Ethereum suffered more dramatically with $1.26 billion in liquidations, dropping over 12% as its role as collateral in DeFi protocols triggered cascading failures across lending platforms. The real devastation occurred in altcoins, where lower liquidity created catastrophic losses. XRP flash-crashed 41% to briefly touch $0.77 before recovering. Solana saw approximately $2 billion in liquidations, Dogecoin fell 21%, and some smaller tokens like ATOM reportedly approached zero before partially recovering. The single largest liquidation order was $87.53 million on a BTC/USDT pair.
Platform-specific data revealed the extent of destruction. On Hyperliquid, more than 1,000 wallets were completely liquidated and 6,300 ended up in the red, with 205 traders losing over $1 million each. The platform saw $1.23 billion erased, though the top 100 traders collectively gained $1.69 billion from short positions. This stark contrast raised questions about market fairness and whether sophisticated traders had advance warning. Reports surfaced of one whale allegedly doubling their short exposure 30 minutes before Trump’s announcement, then closing positions for an estimated $190-200 million profit.
Market Manipulation Concerns and Exchange Issues
As the dust settled, troubling questions emerged about insider trading and structural problems. Arthur Hayes, former BitMEX CEO, suggested that centralised exchanges’ automatic liquidation of cross-margined collateral amplified the crash by liquidating positions across multiple assets simultaneously. Binance experienced a 40-minute stablecoin depeg glitch causing errant liquidations, leading to offers of fee reimbursement. The fact that Binance only logs one liquidation per second means the reported $19 billion likely understates reality significantly.
David Jeong, CEO of Tread.fi, called it “a black swan event” noting that institutions didn’t expect this volatility level. Vincent Liu of Kronos Research stated the crash was “sparked by US-China tariff fears but fueled by institutional over-leverage.” The event exposed that even sophisticated institutional traders had accumulated excessive leverage that traditional metrics failed to capture. Market makers temporarily stepped back to manage their own risk, which further exacerbated price collapses as order books thinned dramatically.
The Path to Recovery After The Crypto Liquidation
The market is now in a multi-phase recovery process. The initial “bleeding out” phase occurred during the crash. Currently, market makers and large traders are absorbing sell orders to restore equilibrium, a process that could span several days given the liquidation scale. The final phase involves dealers unwinding positions acquired during the crash, which typically creates volatility before finding true equilibrium. This process is especially slow over weekends when spot ETFs don’t operate. Following the main event, the market experienced over $700 million in additional liquidations affecting 180,000 more traders, showing continued fragility.
Despite the carnage, many analysts remain surprisingly optimistic. The primary argument is that forced removal of over-leveraged positions creates a healthier foundation for growth. Spot Bitcoin ETFs continue attracting institutional capital, with BlackRock’s iShares Bitcoin Trust holding over 773,000 BTC. Marathon Digital purchased an additional 400 BTC during the crash, demonstrating institutional conviction. Geoff Kendrick of Standard Chartered maintains Bitcoin could reach $175,000-$250,000 by year-end 2025, arguing fundamentals remain intact and leverage flushes often precede major rallies.
Risks and Uncertainties
However, significant risks remain. If Trump’s 100% tariff proceeds on November 1, 2025, markets could face renewed pressure. The U.S. government shutdown has delayed economic data, leaving markets without visibility during uncertainty. Some institutional funds have halted crypto capital deployment, taking a wait-and-see approach. Bitcoin has held $110,000 support but repeatedly failed to break above $120,000-$125,000, suggesting selling pressure remains strong. Brian Strugats of Multicoin Capital warned of potential counterparty exposure and broader contagion if additional exchange failures emerge.
The event revealed both weaknesses and strengths in crypto infrastructure. Centralized exchanges showed vulnerabilities with technical glitches and delayed reporting, while DeFi protocols generally performed better with automated systems maintaining solvency through proper collateralization. This performance difference may accelerate shifts toward decentralized solutions offering greater transparency. Regulatory scrutiny will intensify, with potential changes including leverage caps, mandatory real-time liquidation reporting, higher exchange capital requirements, and enhanced investor protections.
What This Means for Crypto’s Future
The October 2025 liquidation will be studied as a case study in leverage risks and the interplay between geopolitics and modern finance. For traders who survived, the lesson is clear: leverage amplifies losses catastrophically in crypto’s 24/7 market. The crash doesn’t invalidate crypto’s long-term potential since the trigger was external geopolitical shock rather than internal infrastructure failure. Blockchain technology continues advancing, institutional adoption grows, and use cases expand. The crash simply reset excessive speculation built up in leveraged positions.
History suggests major liquidations often mark inflection points rather than endings. The March 2020 COVID crash preceded a historic bull run to new highs. Even the FTX collapse eventually gave way to Bitcoin surpassing $100,000. For those maintaining long-term conviction, the current environment may represent opportunity with leverage flushed, weak hands shaken out, and prices corrected to attractive levels. The key is appropriate risk management, avoiding excessive leverage, and maintaining multi-year time horizons. The October 2025 liquidation will be remembered either as crypto’s beginning of the end or as a painful but necessary reset on the path to the next major rally. Time will reveal which narrative proves correct, but the markets always recover—the question is whether you’ll be positioned to participate when they do.
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