What to expect after the last major liquidation wave in the cryptocurrency market and the largest in history?
The cryptocurrency market experienced one of its steepest crashes in history on October 10. However, this time, the main driver of the decline wasn’t Bitcoin, but smaller, lesser-known tokens.
According to CoinGlass data, more than 1.6 million investors lost $19.37 billion in leveraged positions in 24 hours, marking the largest liquidation in crypto history. While Bitcoin and Ethereum have since recouped some of their losses, many altcoins remain severely damaged.
Frank Chaparro of GSR explained the relative resilience of Bitcoin and ETH with these words:
“These assets are larger, more established, and backed by institutional products like ETFs. Other altcoins are smaller, more illiquid, and inherently more volatile.”
According to data from Wintermute, mid- and small-cap tokens lost between 60% and 80% of their value during the crash, while Bitcoin fell by only 11% and Ethereum by 13%.
This historic wave of liquidations began after US President Donald Trump announced that he would impose “massive” tariffs on China on October 10. This news sent shockwaves through global markets and triggered a chain reaction of unwinding leveraged positions in the crypto market.
Chaparro described the situation as a “doom loop”:
“The price drop triggers some liquidations, which then push the price down even further. This then leads to more accounts becoming unsecured, and the cycle repeats.”
The surge in leveraged trading has exposed the fragile nature of the crypto market. Spot Bitcoin and ETH ETFs, approved in the US last year, gave investors access to products with 2x or 3x leverage. Grayscale Research Director Zach Pandl warned:
“More leverage means more risk in every financial market.”
Chaparro argues that the crypto market, despite trading 24/7, relies on traditional exchange infrastructure:
“There are no circuit breakers like in traditional stock markets. Therefore, when liquidity dries up, chain liquidations are inevitable.”
Crypto researcher Molly White noted in a blog post that this crash could be a harbinger of similar crises in the future:
“This crash showed how quickly investors can panic if they think prices will always rise.”
Bitwise investment strategist Juan Leon believes that the entry of institutional investors into the market could reduce volatility over time:
