On October 10, the cryptocurrency market was rocked by a sudden flash crash that traders are calling the worst liquidation event in crypto history. In the span of mere minutes, Bitcoin’s price plunged by over $10,000, and the carnage rippled across the board – scores of altcoins crashed 50% to as much as 70% in value[1][2]. More than $19–20 billion worth of leveraged positions were wiped out almost instantaneously as cascading margin calls forced trades to unwind. The one-day selloff was so severe that many say it made the FTX collapse of 2022 look tame by comparison. Below we break down what happened during this historic crash, why it was so extreme, and what it means going forward for crypto investors and markets.


This extreme downturn wasn’t just a random glitch – a perfect storm of factors hit the market at once. Global macro news provided the spark: late on Oct. 10, U.S. President Donald Trump shocked markets by announcing a new 100% tariff on Chinese imports, escalating trade war tensions[3]. This sudden policy threat sent panic through all risk assets – stock indices fell sharply, and crypto, far from acting as “digital gold,” followed suit into freefall[1]. As prices started dropping, the crypto market’s heavy leverage turned a bad day into a disaster. Millions of traders had piled into bullish bets (so-called long positions) using borrowed funds, expecting “Uptober” gains. When the tariff news hit, those over-leveraged positions unraveled at lightning speed. Low liquidity (few buy orders on the books) meant there was little cushion, so prices collapsed within minutes as sell orders overwhelmed the exchanges[3].

The Worst Liquidation Event in Crypto’s History

As the dust settled, it became clear this was the largest single-day wipeout ever in crypto. Data from CoinGlass and other trackers showed roughly $19–20 billion in leveraged positions got liquidated over a 24-hour period[3]. To put that in perspective, this one-day crash was about 19 times bigger (in dollar terms) than the March 2020 “Black Thursday” crash or the FTX meltdown in November 2022[4]. In other words, it dwarfed any prior crypto market calamity[5].

Nearly 1.6 million trading accounts were liquidated as exchanges automatically closed out positions, and an estimated 87% of those positions were longs (bets that prices would rise)[6]. This skew highlights just how overconfident and over-leveraged the market was going into the event. Traders chasing quick profits with high leverage found themselves wiped out en masse, as the cascading liquidations created a self-feeding cycle of selling. One veteran observer noted, “I gotta say I have never seen anything like this in my decade-plus investing career,” underscoring the unprecedented speed and scale of the crash[7].

Notably, Bitcoin — which had hit a record high above $126,000 just days earlier — plunged from around $122K to about $104K at the lows[8]. That’s a drop of over $10,000 (roughly 14%) in the blink of an eye. Ethereum fell over 12% intraday (from ~$4,300 to under $3,600)[9]. But it was many smaller altcoins that saw the most devastating losses: for example, Dogecoin crashed over 50%, and Avalanche (AVAX) plunged about 70% at one point before bouncing off lows[2]. Some lesser-known tokens temporarily “flash-crashed” nearly to zero on certain exchanges with thin liquidity, as there were virtually no buy orders to catch their falls. In short, any coin seen as remotely speculative got pummeled. The selloff “snuffed out” the frothy speculative excess that had been building in crypto’s riskiest corners[10].

Why Did It Get So Bad? (Leverage and Liquidation Cascades)

Over-leveraged positioning was the primary reason this crash was so ferocious. In the lead-up, sentiment in crypto was extremely bullish – Bitcoin’s surging to all-time highs had many traders going “all-in” with leverage, using margin loans to amplify their bets. This works well when prices rise, but when the market turns, it’s a recipe for disaster. On Oct. 10, once prices started falling, those highly leveraged long positions hit their pain thresholds. Exchanges issued margin calls and automatically sold off assets in those accounts (liquidating the positions) to prevent further losses. Each forced sell order pushed prices down further, which in turn tripped the next wave of stop-losses and liquidations. This chain reaction drove prices lower in a very short time frame – essentially a rapid domino effect. Analysts have called it a historic “deleveraging” event, as billions of dollars of hypothetical value were wiped out in hours, nine times more than even the worst day earlier this year[4].

The event also exposed some weaknesses in exchange infrastructure and risk controls. Because so many traders were on the same side of the boat (predominantly long), the risk management systems on some trading platforms struggled. Order books dried up at the worst moments, and some exchanges even went offline or halted trading amid the volatility. (In contrast, decentralized exchanges like Uniswap that rely on automated liquidity pools reportedly continued operating smoothly throughout[11].) This has prompted calls within the industry to improve safeguards – for example, circuit-breakers to pause trading during extreme moves, better liquidity provisioning for smaller coins, and more conservative leverage limits to prevent such a rapid cascade. Regulators too are taking notice, with expectations of greater scrutiny on how crypto platforms handle margin trading and liquidations after this incident[12][13].

Retail Investors Reeling – Was the “House” Rigged?

For many everyday crypto investors, the flash crash felt like a betrayal. Over $20 billion in value vanished from traders’ accounts almost instantly, and stories spread of individuals losing their life savings or getting margin-called out of positions. In the aftermath, some retail traders openly questioned whether “the house was rigged against them” from the start, venting on social media that the odds seemed stacked in favor of exchanges and big players. It’s an understandable sentiment – when markets move that fast, it can feel like someone must have pulled the rug on the little guys.

Indeed, the cause of the crash is still being debated, which fuels conspiracy theories. While most analysts point to the macroeconomic shock (Trump’s tariff announcement) combined with the obvious over-leverage as the fundamental trigger[14], other more dubious theories have made the rounds. These include allegations of insider trading (i.e. some traders knowing about the tariff news before it hit and shorting the market), or claims that a major exchange intentionally withdrew liquidity at a critical moment to induce a cascade[15]. One prominent hypothesis singled out Binance – suggesting that the exchange might have briefly halted certain order book liquidity, exacerbating the plunge. As of now, there’s no hard evidence of such manipulation, but the mere perception of it has rattled trust.

What is clear is that a lot of retail traders were using high leverage without fully appreciating the risks. When nearly 87% of liquidated positions are longs[11], it means the crowd was all on one side. Unfortunately, in markets, the “house” (be it the exchange or simply the reality of volatility) often wins when traders overextend. The flash crash has already sparked talk of lawsuits: the CEO of market-maker Wintermute, for instance, expects a wave of legal action targeting any alleged market manipulators or platform failures that worsened the crash[15][13]. Whether or not courts find anyone to blame, the event has undoubtedly shaken confidence among everyday crypto participants. It serves as a harsh reminder that trading crypto with leverage can be as risky as a casino – and sometimes just as unforgiving.

Aftermath: A “Market Reset” and Signs of Recovery?

In the two weeks since the crash, the crypto market has been in a bit of a limbo. The initial panic has subsided – Bitcoin bounced off its lows (climbing back from ~$104K to the ~$115K range) and found some stability[8]. Long-term holders and institutional investors largely held firm through the storm, and many even bought the dip at fire-sale prices. In fact, on-chain data indicates that capital has been rotating from shakier altcoins into Bitcoin, as investors seek safety in the blue-chip crypto asset[16]. This rotation helped Bitcoin recover faster, while many altcoins are still lagging far below their pre-crash levels. As of late October, a number of popular altcoins (outside of Ethereum) remain stuck near their post-crash lows, with risk appetite among traders much more subdued than just a month ago[10]. Essentially, the speculative froth that had built up during the rally has been washed out.

The good news, several analysts note, is that this purge of excessive leverage may have made the market healthier going forward. “The crash has cleaned out the excessive leverage and reset the risk in the market, for now,” said Nic Puckrin of Coin Bureau[17]. With many of the weakest hands forced out, crypto prices can perhaps move more organically based on real demand instead of dangerous speculation. Past episodes show that such “flush-outs” often precede strong rebounds – for example, after the March 2020 crash and the 2022 FTX fiasco, Bitcoin eventually came back with a vengeance[18]. There is cautious optimism that history could repeat, if no new shocks hit in the immediate term. Notably, despite the size of this crash, we haven’t seen any major firms or exchanges declare insolvency as a direct result (unlike in the FTX collapse). So the crypto industry’s core plumbing (brokers, lenders, and big players) seems to have withstood the blow – a sign of resilience that could bolster confidence once the panic truly passes[19][20].

What Does This Mean Going Forward?

For investors, the lesson from this incident is crystal clear: be extremely careful with leverage. Crypto is volatile on a good day, and using high leverage (borrowing to multiply your position) can lead to ruin literally overnight. Going forward, we can expect many traders – especially retail ones – to be more cautious, at least in the near term. Many have learned the hard way that a 10% price drop can snowball into a 100% loss of one’s position when leverage is involved. Even seasoned traders are likely to hedge their bets more actively; indeed, the crypto options markets saw a surge in protective “puts” (bets on or insurance against further price declines) immediately after the crash[21].

For the crypto market at large, this event is prompting some soul-searching and likely reforms. Exchanges will be reviewing their risk management systems, and we may see new safeguards to prevent such abrupt cascades. Don’t be surprised if trading platforms introduce lower leverage limits or stronger auto-deleveraging mechanisms for the most volatile assets. Regulators, too, have taken note – the flash crash highlighted systemic vulnerabilities in an industry still often called the “Wild West” of finance[13]. There could be growing pressure to impose stricter oversight on crypto derivatives trading, or at least to ensure exchanges are transparent about how they handle liquidity during extreme events.

On a more positive note, many experts are framing the Oct. 10 crash as a “necessary reset” rather than the end of crypto’s story[22]. By flushing out reckless speculation, the market may be set up for more sustainable growth. Long-term crypto believers point out that the technology and adoption drivers for crypto haven’t gone away – if anything, those fundamentals were largely unaffected by this flash crash (which was driven by external news and leverage, not a blockchain failure). With weaker hands shaken out, the path could be clearer for steadier growth ahead, supported by investors who respect the risks involved. Of course, much will depend on broader factors like global economic stability and regulatory developments, but the consensus is that crypto will endure this trial by fire.