Wild moves are a part of the crypto market. So, almost every investor or trader who enters is generally prepared for such moves. But sometimes, these moves are so wild, they even shock the market veterans.
One such event unfolded yesterday when BTC tumbled to $102,000 on some exchanges. ETH also went down to around $3,500. With such a crash, a lot of traders were caught off guard. Result? $19 billion in leveraged positions were wiped out in the biggest one-day liquidation the digital asset market had ever seen.
Now the question is, what was this crash all about? Was it the result of the retail sentiment? Was it a panic? Was it an institutional failure? Well, it’s time to find out.
Let’s go back a few months in time for better context.
The Market Before the Blow
Through Q3 2025, crypto markets ran hot. Bitcoin crossed $100,000 in July and didn’t look back. Ethereum moved above $4,000. Altcoins with barely working products doubled and tripled in a matter of weeks. Capital rotated quickly. Risk appetite surged.
Open interest on perpetual contracts climbed steadily. Funding rates leaned long. Order books began thinning near resistance levels, but the trades kept coming in.
Institutional flows were active too. Block trades on large exchanges revealed appetite for upside. Crypto Twitter is flooded with charts calling $150K next. Underneath the bullishness, structural pressure was quietly building.
Leverage kept increasing. Short-term inflows drove up volatility. And most importantly, directional bets were crowding on the same side of the trade — long. That’s how markets looked in the week leading up to October 10 and 11
The Catalyst: One Line From Washington
The spark came at 8:43 AM ET.
A statement from the White House confirmed that President Trump was pushing forward with a 100% tariff on Chinese goods, a retaliation to China’s planned export curbs on rare earth minerals.
China’s rare earth policies had already been under scrutiny for weeks. Tensions were mounting. But a full tariff confirmation changed the tone instantly, from posturing to action.
Result? Bitcoin began slipping within minutes. Ethereum followed. Open interest held steady for the first few ticks, then started dropping fast. Liquidations were just beginning.
The Cascade Effect
At 9:12 AM, Bitcoin broke below $118,000. That was the first inflection point. Over the next 30 minutes, BTC lost $10,000 more. Ethereum dipped under $3,500. SOL, AVAX, MATIC, and even large-cap stablecoin pairs showed slippage.
According to data from CoinGlass and TradingView:
- $19.1 billion in leveraged positions were liquidated within 24 hours
- Of that, $16.6 billion came from longs
- Over 1.6 million traders were wiped out
- $3 billion in liquidations occurred within the first hour
- BTC touched a low of $102,000 before rebounding to near $113,000
The worst part is that this came as a mechanical execution instead of a slow bleed. Liquidation engines triggered at speed, across platforms, across pairs, and the result was catastrophic.
Open interest fell off a cliff. Funding rates flipped. And derivatives books, once full of directional conviction, emptied in real time.
What Snapped First?
Markets did not crash in straight lines; they never do. They crack in layers. By the time price candles start collapsing, the groundwork has already been laid across positioning, liquidity, and leverage. That’s exactly what played out on October 10-11.
It was a multi-layered breakdown.
Overcrowded Longs
Leading up to the tariff announcement, open interest across Bitcoin and Ethereum perpetuals reached multi-month highs. The market had a clear bias, long-term.
Funding rates were consistently positive, meaning long traders were paying shorts to stay in position. That’s not unusual in a bullish cycle. But when everyone’s on the same side of the boat, balance becomes fragile.
When Bitcoin began to dip below $118K, the margin got tested. These weren’t lightly leveraged positions. Data from Coinglass showed funding rates as high as 0.012% per 8-hour window on some exchanges — an expensive bias to hold. Once liquidation thresholds neared, margin evaporated quickly.
This was a structural closing.
Shallow Order Books
Price drops don’t escalate unless liquidity disappears. And in this case, it did.
Market depth below $115K on major exchanges was already thin by the morning of the 11th. Bids were spread out. Some were phantom orders. When BTC crossed key liquidation bands, actual buyers backed off. The few limit orders that remained got filled fast. After that, there was no floor, just a free fall.
Slippage widened within minutes on multiple exchanges. A few $10M sell-offs were enough to move the price thousands of dollars. This was a liquidity vacuum.
Altcoins with even thinner books were hit harder. SOL, MATIC, and ADA dropped by double-digit percentages in under 30 minutes, according to TradingView data.
High Cross-Margin Exposure
Most traders don’t isolate risk. They use cross-margin accounts, where a single pool of funds backs multiple trades like spot, perpetuals, and options combined.
That’s efficient during normal cycles. But when a major asset like BTC drops fast, it pulls down the entire portfolio. Suddenly, a trader long BTC, ETH, and LINK sees all three positions closed, even if only one moved heavily.
This is where the contagion spread. Margin calls triggered portfolio-wide liquidations, especially among users with aggressive leverage. On multiple platforms, cross-margin exposure magnified the loss. Losses cascaded across pairs and positions.
Insurance funds absorbed some of the hit. But a large chunk of the liquidations went straight to market.
Automated Liquidation Engines
Crypto exchanges don’t handle liquidations manually. They run automated systems that monitor position health in real time. Once collateral drops below a threshold, the engine triggers a market sell order, regardless of volume, depth, or time.
That’s what turned a slide into a cascade.
As BTC slipped from $115K to $110K, each 1% move liquidated more accounts. Each liquidation added more selling pressure. That triggered the next wave. It was an execution spiral, which is rare, even for the crypto market.
Some exchanges attempted to slow the chain by throttling liquidation rates or using stop-gap risk rules. Others allowed it to run a full cycle. Either way, the automation became the momentum.
Once BTC hit $102K, the system had exhausted most of the high-risk margin, and only then did the price begin to recover.
What This Event Proved?
What makes it very interesting is that there was no protocol exploitation or an exchange failure that led to this drop. The system worked perfectly fine, and the irony is that perfection made this event more brutal.
Because when leverage concentrates, liquidity thins, and automation controls the exits, a trigger becomes a chain reaction.
And that’s exactly what this day became, a structural liquidation event built into the market’s design.
The Fallout
Numbers tell the story. But this one left behavioral marks, too.
Across crypto X, price charts got replaced by liquidation heatmaps. Traders who had posted daily gains went silent. Others posted screenshots of their positions and closed at the worst possible moments.
Volume on stablecoin pairs spiked. USDT, USDC, and even FDUSD saw sudden flows into sidelined wallets. So instead of a full retreat, it felt like a pause.
Some altcoins dropped more than 25%. Meme coins erased two months of gains. Even blue-chip DeFi names like Aave and Uniswap saw double-digit losses. The worst part? There were no fundamental issues with them. But this was just due to the liquidation crossflow.
Centralized exchanges handled the volume, but only a few boutique crypto-exchanges like Visiion.io were able to do it fairly well. Delays were reported across mobile apps. A few platforms triggered temporary risk limits to prevent cascading liquidations from overwhelming their systems.
What stood out most was the speed. There was no slow deterioration and accumulation of fear. Just one headline, followed by minutes of data-driven reaction.
The Echoes in Derivatives
While spot markets saw the price impact, derivatives told the deeper story.
BTC and ETH funding rates went negative by midday, signaling a complete flip in positioning. Open interest dropped by over 40%. That’s not sentiment. That’s capital being forcibly removed.
Options volume spiked, too, especially on puts. Skew shifted bearish across expirations. Traders who weren’t liquidated started hedging their exposure late, but aggressively.
ETH options showed higher IV than BTC for the first time in weeks. That shift reflected higher risk pricing around smart contract ecosystem tokens, possibly due to concerns over altcoin exposure.
The event became a masterclass in how derivatives don’t just respond to volatility, they create it.
Bigger Picture
This wasn’t the largest price drop in Bitcoin’s history. But it was the largest liquidation day by value. That distinction is important. Because this event didn’t stem from a crypto protocol failure, it wasn’t a bug. It wasn’t a scam. It wasn’t even a crypto-specific headline.
It was an external policy move, a geopolitical shift that triggered internal fragility.
And that makes this episode a different kind of case study. The crypto market didn’t react irrationally. It reacted structurally.
Comparison Point: March 2020, May 2021, and Now
In March 2020, crypto fell with everything else during the COVID panic. That was a risk-off macro move. In May 2021, the Chinese mining ban sparked a price drop, but also a market-wide narrative shift.
October 2025 doesn’t fit either mold. There was no internal crypto news. No infrastructure disruption. No sentiment reversal.
The difference here was leverage. Analysts believe the amount of leverage built up across exchanges, especially retail platforms offering 20x–50x positions, created conditions for a single trigger to wipe the board clean.
The tariff announcement was the trigger. But the market was already wired to detonate.
What Now?
The dust has settled. Bitcoin trading in the range of $110k to $113K at the time this blog is being written. Ethereum sits near $3,700. Prices are recovering, but that’s not the whole picture.
Here’s what’s visible in the aftermath:
- Derivatives volume remains elevated, but directional bets are flatter
- Funding rates stay neutral, a sign that traders are no longer crowding on one side
- Spot inflows into cold storage have picked up
- Stablecoin liquidity remains high on exchanges, a sign of readiness, not retreat
Some analysts suggest the market is recalibrating.
Wrapping Up
A lot of analysts say that the October 11 liquidation event will go down as a structural turning point. Instead of being triggered by issues like fear, fraud, or the crypto itself, it relied on the system’s efficiency and over-leverage.
Tariff on China was a trigger, sure. But the game was much bigger than that. The $19B in liquidations told us about how fragile the system can be when conviction runs too hot, too fast.
Stay tuned for more updates on the market.
