Deck: How a major October crash reset crypto’s trajectory and set the stage for the next bull run
Introduction
October 10th's crypto market crash shocked many investors with $20 billion wiped out in liquidations. Yet, according to a fresh report from Coinbase Institutional, this brutal sell-off might actually be a reset, not a top, giving crypto the foundation to climb higher. In this article, we break down the report’s key insights, explain why some altcoins took a hit, and reveal which narratives smart money is betting on next. Whether you’re a seasoned trader or just crypto-curious, this guide will help you understand what could come next for Bitcoin, Ethereum, and the broader market.
October’s Liquidation Event: A Market Reset, Not a Collapse
On October 10th, President Trump's announcement of 100% tariffs on Chinese goods thrust crypto into chaos. Overleveraged traders were forced into liquidations—mass sell-offs triggered automatically when prices fall below borrowed positions.
- $20 billion liquidated in one day, nine times the scale of February’s flash crash, and nearly 20 times the FTX collapse in November 2022.
- Bitcoin (BTC) plunged roughly 10%, from $121K to $109K. The total crypto market cap dropped 20%, from $4 trillion to $3.2 trillion.
- Altcoins fared worse, some losing between 40% and 70% due to fragmented liquidity across centralized and decentralized exchanges.
This cascading effect is much like the “Great Grain Robbery” of 1973, when scarce information and panic buying spiked grain prices. Similarly, thin liquidity plus a flood of panic selling drove crypto prices below liquidation thresholds, pushing prices even lower in a domino effect.
Investor takeaway: The massive liquidation was painful, but necessary. It purged excess leverage and uncertainty, preparing the market for a healthier upward move.
Answer Box: What triggered the October 10th crypto liquidation crash?
The crash was triggered when President Trump announced 100% tariffs on Chinese goods, sparking panic and forcing overleveraged crypto traders into automatic liquidations worth $20 billion, leading to a sharp price drop across Bitcoin and altcoins.
Why This Reset Could Set the Stage for Higher Highs
Coinbase’s report calls this a “leverage flush” that resets the market rather than signaling a cycle top. Key points:
- Leverage ratios have normalized. The ratio of derivatives open interest to market cap (excluding stablecoins) shows much lower leverage, meaning fewer traders are risking outsized bets.
- Market structure repair expected. The upcoming market moves are likely to come from stabilization and improved market depth, not from a breakout headline.
- Institutional flows will matter. Major investors have de-risked by holding blue-chip cryptos and limiting leverage. Their inflows could sustainably fuel growth over months.
- Bitcoin dominance, a measure of BTC’s market cap share, is expected to rise for 2–3 months before altcoins rotate back into favor.
- BTC price range based on options market signals is $90K–$160K, with an upside bias due to easing leverage pressures.
Investor takeaway: The market is less prone to extreme crashes for now but will still see bursts of volatility. Watch institutional behavior closely—when they move, crypto follows.
Data Callout: October 10th liquidations = 9x February flash crash + 19x FTX collapse
This extreme liquidation magnitude highlights the scale of October’s event—resetting excesses far beyond prior market shocks. It offers valuable context for any investor feeling jittery about recent volatility.
Where Is Smart Money Deploying Capital Now?
Coinbase’s report tracks capital flows from investment funds, market makers, venture capitalists, and top traders, revealing the current narratives drawing interest:
- Ethereum ecosystem and Layer 2s: Big inflows especially into Arbitrum and Ethereum proper. Base and Optimism (Layer 2 chains on Ethereum) have yet to see significant capital but are flagged as potential inflection points.
- Yield protocols rising: Staking and restaking platforms grow strongly, boosted by Grayscale’s new staked Ethereum and Solana ETFs. Large investors chase double-digit APYs.
- Utility sectors (NFTs, Metaverse, Crypto Gaming): Despite a sharp 50% NFT market cap drop in October, these areas have strong momentum and smart money inflows.
- Tokenized Real-World Assets (RWAs): Institutional investors, led by BlackRock’s $1.5 billion Bidd Fund, are channeling capital into tokenized bonds and treasuries on Polygon, Avalanche, and Aptos. This sector offers stable yields (~4-6%) and bridges traditional finance with DeFi.
Investor takeaway: Altcoin season as a broad phenomenon is fading. Success depends on picking the right sector or narrative to benefit from capital rotation—yield, NFTs/gaming/metaverse, and RWAs are top candidates.
Risks and What Could Go Wrong
No analysis is complete without weighing risks:
- Geopolitical shocks: New tariffs or trade wars could repeat October’s panic.
- Regulatory hurdles: Delays or opposition to bills like the Genius and Clarity Acts may dampen sentiment.
- Macro volatility: Rising bond yields above current ~4% could pressure crypto alongside equities.
- Liquidity gaps: Ongoing market depth recovery means brief but sharp price swings remain likely.
- Limited fresh capital: Current moves mostly shuffle existing money. A new bull run needs new inflows; otherwise, rallies risk being short-lived.
Investors should maintain risk discipline and follow multiple indicators, not just sentiment or capital flows.
Actionable Summary: Key Takeaways for Investors
- October 10th's crash was an extreme market leverage reset—painful but vital.
- Leverage is down and market depth is recovering, setting up for steady upside with bursts of volatility.
- Institutional investors favor large-cap cryptos, staking yields, NFTs/metaverse, and tokenized RWAs.
- Bitcoin dominance may rise short-term, but expect sector rotation after 2–3 months.
- Altcoin season is unlikely to repeat broadly without significant new capital inflows.
- Watch capital flow data and RSI indicators for entry points, especially on Ethereum Layer 2s like Base and Optimism.
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FAQ: People Also Ask
Q1: Has the crypto market hit its bottom after October’s crash?
Based on RSI levels and liquidation data, many indicators suggest a local bottom has been reached, often signaling a potential rally ahead.
Q2: Why did altcoins suffer more than Bitcoin in the crash?
Altcoins typically have thinner liquidity spread across many exchanges and decentralized platforms, making them more vulnerable during mass liquidations.
Q3: What does ‘leverage flush’ mean in crypto?
It refers to forced selling of overleveraged positions, resetting market leverage to healthier levels and reducing risk for future price moves.
Q4: What are tokenized real-world assets (RWAs) and why are investors excited?
RWAs bring traditional assets like bonds and treasuries on-chain, offering stable yields accessible via DeFi, bridging traditional finance and crypto.
Q5: Will Bitcoin dominance continue rising?
It’s expected to rise in the near term as institutions focus on BTC, but longer-term trends depend on fresh capital and altcoin rotations.
Disclaimer: This article is educational content summarizing a recent Coinbase Institutional report. It is not financial advice. Cryptocurrency investing involves risk. Always do your own research and consider your risk tolerance before trading.
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By Wolfy Wealth - Empowering crypto investors since 2016
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Disclosure: Authors may be crypto investors mentioned in this newsletter. Wolfy Wealth Crypto newsletter, does not represent an offer to trade securities or other financial instruments. Our analyses, information and investment strategies are for informational purposes only, in order to spread knowledge about the crypto market. Any investments in variable income may cause partial or total loss of the capital used. Therefore, the recipient of this newsletter should always develop their own analyses and investment strategies. In addition, any investment decisions should be based on the investor's risk profile
