Exploring the key events, theories, and ongoing impact of the unprecedented crypto crash on October 10th.
On October 10th, crypto markets didn’t just dip—they plunged dramatically, triggering relentless selling pressures that shocked even seasoned bears. Unlike typical bear markets, this collapse was fast and sustained, without a clear, headline-grabbing cause like an exchange meltdown or insolvency. Months later, investors are still wondering: What really broke, and why hasn’t the market stabilized yet? In this article, we dive deep into the major theories behind the October 10th crash, examining the macro triggers, market maker turmoil, and potential exchange involvements. By the end, you’ll get a clearer picture of the crash’s origins and what to watch for going forward.
What Happened on October 10th? A Day of Shock and Cascade
October 10th wasn’t just another red day. It began with a macroeconomic shock—then-President Trump imposed 130% tariffs on China, igniting fear in global markets. The S&P 500 dropped nearly 3% within hours. Bitcoin didn’t hold up, plunging about 15% as risk-off sentiment spread.
Once Bitcoin started breaking key support levels, a liquidation cascade unfolded. Over $19 billion in leveraged crypto positions were wiped out within 24 hours. When so much leverage is flushed, liquidity vanishes. Order books thin out. Spreads widen. Prices fall into thinner bids, triggering even more forced sales. Some exchanges triggered Auto-Deleveraging (ADL)—a mechanism that doesn’t just liquidate risky traders but can forcibly close even profitable traders’ positions to cover losses on the other side.
The Altcoin Avalanche
Altcoins suffered far worse: some dropped 30%, 40%, even 60% in hours. Cosmos (ATOM) infamously “wicked” to near zero on Binance, and stablecoin products like USDE, WB ETH, and BN Soul temporarily lost their pegs.
So yes, the system got hit hard. The macro shock combined with margin liquidations and thin liquidity explain the crash itself.
The Big Puzzle: Why Has Selling Pressure Persisted?
Usually, after extreme liquidation flushes, the market bounces back or at least stabilizes. This time, selling pressure kept dragging prices down for months. That suggests something deeper broke beyond just a macro shock or levered unwind.
Theory 1: Market Makers Got Wrecked
Market makers, who typically maintain delta-neutral portfolios balancing longs and shorts, were hit hard by ADL. When their profitable shorts were forcibly closed, they were left with unhedged exposure and big balance sheet losses.
Multiple reports estimate 30–50% of crypto market makers suffered heavy damage that day. Funds like ABC, Sciant ARB, and Seleni Capital publicly disclosed tens of millions lost on October 10th. The aftermath: ultra-thin order books, higher price sensitivity to volume, and a liquidity drought.
Unlike regulated markets, crypto market makers are not obligated to provide liquidity, so many likely pulled back. Rumors swirled that Wintermute, one of the biggest players, might have had crippling losses, though no official bankruptcy was confirmed.
This broken market maker theory explains why liquidity never fully recovered and why prices remain fragile in response to trades.
Theory 2: Exchange Involvement, Especially Binance
Binance was at the epicenter of the crash. Faulty price oracles on the platform triggered the initial liquidation cascade spreading across venues. Binance acknowledged issues, compensating users nearly $300 million from its insurance fund.
On-chain data reveals billions in asset outflows from Binance after October 10th. Moreover, much of the relentless selling pressure seemed centered on Binance during Asian trading hours, sparking speculation Binance might have been intentionally pushing prices down to trigger liquidations and cover a potential funding hole.
This is a serious allegation without hard proof. Binance’s on-chain reserves appear intact, suggesting no outright insolvency. However, critics argue that Binance’s risky marketing and operations contributed significantly to the crash’s severity.
Theory 3: A Hong Kong-Based Cross-Asset Fund Implosion
The third and perhaps most intriguing theory suggests a massive blowup or hole at a Hong Kong-based cross-asset hedge fund on October 10th. Such a fund’s forced selling across multiple crypto positions could have cascaded into pervasive liquidation pressure.
Though details are murky and unconfirmed publicly, this off-exchange, over-leveraged institutional player theory fits the profile: widespread forced selling without a clear bankrupt entity or exchange failure.
Quick Answer Box: What Caused the October 10th Crypto Crash?
The October 10th crash was a perfect storm of macro shocks and forced liquidations. The initial trigger was a trade war escalation causing risk-off sentiment. This sparked a massive $19 billion liquidation cascade, aided by auto-deleveraging forcing even hedged traders out. The continued selling pressure likely stems from damaged market makers, potential exchange issues mainly on Binance, and possibly a large hedge fund blowup generating persistent forced sales.
Data Callout: $19 Billion Liquidated in 24 Hours
On October 10th, over $19 billion worth of leveraged crypto positions were liquidated within just one day. This volume of forced selling rapidly drained liquidity, which is why price falls cascaded so deeply and liquidity became extremely thin, amplifying volatility.
Risks and What Could Go Wrong
- Unconfirmed Theories: No single explanation is fully proven. Market maker losses, Binance’s role, and fund blowups remain speculative without regulatory disclosures.
- Continued Forced Selling: If major players are still unwinding, the market could remain volatile and depressed for longer.
- Macro Shocks Resuming: Trade tensions, interest rate changes, or economic downturns risk additional market stress.
- Lack of Market Regulation: Without rules forcing liquidity providers to stay active, crypto markets remain vulnerable to liquidity droughts and price manipulation.
Actionable Summary
- October 10th’s crash combined trade war news with massive $19B leverage liquidations and auto deleveraging.
- Market makers may have suffered 30–50% losses, pulling liquidity and keeping prices fragile.
- Binance’s faulty oracles ignited cascade; billions left the exchange post-crash, fueling speculation.
- A large Hong Kong hedge fund may have triggered extended forced selling.
- Liquidity remains tight; traders should watch for ongoing forced unwinds and fragile price action.
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FAQs
Q: What exactly is auto deleveraging (ADL) in crypto trading?
A: ADL automatically closes traders' positions to cover losses when counterparties fail to meet margin requirements. This can even affect profitable traders, forcing them to unwind to balance the exchange's books.
Q: Why did altcoins collapse harder than Bitcoin on October 10th?
A: Altcoins typically have thinner liquidity and higher volatility. The initial Bitcoin crash triggered panic selling and margin liquidations, leading some altcoins to lose 40–60% in hours—even dropping to near zero momentarily.
Q: Has any major exchange been proven insolvent after October 10th?
A: No confirmed insolvencies have emerged. Binance compensated users from its insurance fund, and despite rumors, no exchange has officially collapsed.
Q: How long could the aftershocks from this crash last?
A: If market maker balance sheets remain damaged or large funds continue forced selling, selling pressure and volatility could persist for months or longer.
Q: Can traders protect themselves from these types of crashes?
A: Using proper risk management, avoiding excessive leverage, and understanding liquidation mechanics like ADL can help. Automated strategies and alerts, such as those offered by Wolfy Wealth PRO, provide extra defense.
Disclaimer: This article provides market analysis and does not constitute financial advice. Crypto investing involves significant risk; always do your own research.
By Wolfy Wealth - Empowering crypto investors since 2016
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