What Is October 10th? Crypto's 10/10 Mass Market Liquidation Event

October 10th Crypto Crash Overview

What Happened on October 10th

The carnage began on Friday evening, October 10, 2025. President Donald Trump posted on Truth Social announcing a 100% tariff on all Chinese imports, effective November 1, 2025, bringing total tariffs on China to 130%. The announcement sent shockwaves through global markets, with equities and commodities selling off sharply.

Cryptocurrency markets, trading 24/7 without circuit breakers and sitting near record-high open interest (total value of outstanding leveraged contracts) of $217 billion, became the perfect pressure point. Bitcoin began sliding from its Friday high of $122,574, falling through key support levels as leveraged traders scrambled to manage positions heading into the weekend when liquidity typically thins.

According to research group Amberdata, the real catastrophe began at 20:50 UTC when the cascade entered its violent phase. Over the next 40 minutes, $6.93 billion in positions were liquidated — a rate of $10.39 billion per hour, compared to just $0.12 billion per hour in the eight hours prior. At exactly 21:15 UTC, $3.21 billion in positions evaporated in 60 seconds.

By the time the dust settled on October 11, Bitcoin had fallen to $104,782 (down 14.5%), Ethereum dropped 12.2% to $3,436, and Solana crashed to $174 after briefly losing over 40% of its value. The total crypto market capitalization shed approximately $350 billion. Over 1.6 million trading accounts (perp traders) were liquidated, with total forced closures reaching over $19 billion according to data from Coinglass.

Understanding Liquidations and the Cascade Effect

To grasp what happened, you need to understand leverage (borrowing money to amplify your trading position) and liquidations (forced closure of positions).

Think of leverage like buying a house with a mortgage. If you want $100,000 of Bitcoin exposure but only have $10,000, you can use 10x leverage to control that full position. This amplifies both gains and losses: a 10% Bitcoin increase gives you a 100% profit, but a 10% decrease wipes out your entire $10,000.

Exchanges set a liquidation price where your position is automatically closed if the market moves against you. When Bitcoin moves sharply and your account equity falls below the maintenance margin (minimum collateral required), the exchange forcibly sells your position. In crypto markets, leverage ratios can reach 10x, 20x, 50x, or even 100x — far exceeding the 2-4x typical in traditional stock markets.

What transforms individual liquidations into market catastrophe is the cascade effect — a financial avalanche where each falling position triggers more to fall. Initial selling pushes Bitcoin from $120,000 to $118,000. Traders using 20x leverage with liquidation prices at $118,000 get automatically sold out. These forced sales push Bitcoin to $116,000, triggering more liquidations. The cycle becomes self-reinforcing: forced selling → lower prices → more liquidations → more forced selling.

On October 10th, this death spiral was catastrophically amplified by cross margin (where one collateral pool backs multiple positions across different cryptocurrencies). When one position lost money, it reduced collateral for all other positions, triggering portfolio-wide liquidations and spreading contagion across markets.

The Binance Controversy: What Really Caused the Crash?

Nearly four months after October 10th, the crypto industry erupted into a public feud over what really caused the cascade. At the center: Binance, the world's largest crypto exchange, and accusations from OKX CEO Star Xu that Binance's marketing practices created a ticking time bomb.

OKX CEO's Accusation

On January 31, 2026, Star Xu posted on X (formerly Twitter): "No complexity. No accident. 10/10 was caused by irresponsible marketing campaigns by certain companies." While not naming Binance initially, Xu's subsequent posts made clear his target: Binance's promotional campaign offering 12% APY (annual percentage yield) on USDe, a synthetic stablecoin issued by Ethena Labs.

Xu's core argument centers on how Binance allegedly blurred the distinction between USDe and traditional stablecoins like USDT and USDC. According to Xu:

1. Binance's USDe promotion: In September 2025, Binance launched a user-acquisition campaign offering 12% APY on USDe holdings during a promotional period. The high yield attracted massive inflows from traders converting their USDT and USDC into USDe.

2. Treating USDe like cash: Critically, Binance allowed USDe to be used as collateral on equal footing with USDT and USDC — without effective restrictions or clear risk warnings. From a user's perspective, trading with USDe appeared identical to traditional stablecoins, yet the actual risk profile was significantly higher. USDe isn't a simple stablecoin backed by dollars — it's closer to a "tokenized hedge fund strategy" that generates yield through complex trading and hedging mechanisms.

3. The leverage loop: Traders discovered they could game the system by creating a leverage loop: Convert USDT/USDC into USDe to earn 12% yield, use that USDe as collateral to borrow more USDT, convert the borrowed USDT back into USDe, repeat the cycle. With each loop, traders artificially generated yields of 24%, 36%, or even over 70% — widely perceived as "low-risk" solely because a major platform enabled it.

4. Systemic risk accumulation: This self-feeding leverage machine rapidly built up systemic risk across global crypto markets. "At that point, even a minor market shock was sufficient to trigger a collapse," Xu explained. "When volatility hit, USDe quickly depegged. This triggered cascading liquidations."

According to Xu, Bitcoin began declining roughly 30 minutes before USDe depegged, confirming his timeline: "The initial move was a market shock. Absent the USDe leverage loop, the market would likely have stabilized at that point. The cascading liquidations were not inevitable—they were amplified by structural leverage."

Xu concluded: "The damage to global users and companies — including OKX customers — was severe, and recovery will take time. As the largest global platform, Binance has outsized influence — and corresponding responsibility as an industry leader."

Binance's Defense

Binance vehemently rejected these accusations. In a detailed report published the same day, the exchange attributed the flash crash to macroeconomic shocks colliding with high leverage and vanishing liquidity — not internal systems failures or product design flaws.

Binance's counterargument:

Macro shock came first: Global markets were already under pressure from Trump's tariff announcement. Bitcoin and Ethereum had risen sharply before early October, leaving traders heavily positioned and exposed with over $100 billion in Bitcoin futures and options open interest.

Liquidations preceded USDe depeg: According to Binance's data, approximately 75% of the day's liquidations occurred before USDe experienced price deviations. Between 21:36 and 22:15 UTC, temporary index deviations (pricing discrepancies) occurred for USDe, WBETH, and BNSOL—but most liquidations had already taken place.

Thin liquidity, not product failure: Binance attributed USDe's depeg to thin liquidity and delayed cross-venue rebalancing, not fundamental product problems. The exchange pointed to data from Kaiko showing that bid-side liquidity nearly disappeared across several major exchanges during peak selling.

Compensation shows good faith: Binance compensated affected users with over $283-328 million, demonstrating accountability even while maintaining the crash wasn't caused by exchange failures.

Former Binance CEO Changpeng "CZ" Zhao called suggestions that Binance caused the crash "far-fetched" during an AMA, stating: "Data speaks. Time doesn't match."

Third-Party Perspectives

The crypto community remains deeply divided:

Dragonfly's Haseeb Qureshi called Xu's narrative "ridiculous", arguing it tries to impose a clean villain on a complex event. His key counterpoint: "USDe price diverged ONLY on Binance, it did not diverge on other venues," while liquidation spirals occurred everywhere. If USDe truly drove the crash, stress would have appeared broadly and simultaneously across all exchanges. Qureshi also noted Bitcoin bottomed 30 minutes before USDe moved significantly, challenging the causation narrative.

Seraphim Czecker, former head of growth at Ethena Labs (USDe's issuer), pushed back: "Markets collapsed because the industry held excessively leveraged altcoins and macro events revealed there was no sustainable organic demand for them."

Salman Banaei, former CFTC regulator, called for investigation: "Whether you love or hate crypto, there should be an investigation by regulators into Oct 10, 2025," comparing it to the May 2010 stock market flash crash. The absence of formal post-mortems leaves room for conspiracy theories to snowball.

The debate even turned personal, with CZ suggesting Dragonfly had conflicts of interest as "one of the largest investors in OKX" (which Xu denied, clarifying the relationship details).

What the Data Shows

Timeline of the October 10th crash.

Source: https://blog.amberdata.io/how-3.21b-vanished-in-60-seconds-october-2025-crypto-crash-explained-through-7-charts

• 14:57 UTC: Trump tariff announcement

• ~20:20 UTC: Bitcoin begins accelerating downward

• 20:50 UTC: Violent cascade phase begins

• 21:15 UTC: $3.21 billion liquidated in 60 seconds

• 21:36-22:15 UTC: USDe depegs to $0.65 on Binance

The sequencing suggests macro shock initiated selling, but USDe's depeg (whether cause or consequence) clearly amplified the damage. What's indisputable: USDe fell to $0.65 only on Binance — not on other exchanges. This suggests Binance-specific market dynamics played a role.

The Immediate Impact and Aftermath

Infrastructure failures: Multiple platforms buckled. Binance reported "systems under heavy load" with API failures and deposit delays. dYdX was offline for eight hours. Lighter experienced a 4.5-hour outage. These failures meant traders couldn't manage positions or add collateral — turning manageable situations into total liquidations.

Depegging events: USDe wasn't alone. BNSOL (Solana wrapped on BNB Chain) and WBETH (wrapped ETH) also lost their pegs on Binance. The exchange later confirmed its pricing relied on internal order books rather than external oracles (third-party price data sources) — a design choice that created vulnerability to localized liquidity crises.

Failed recovery: Alongside general market weakness across all major cryptocurrencies since October 10th, Athena’s USDe has not since recovered its previously dominant market capitalization. 

Persistent market weakness: Liquidity has remained thin and fragmented since October 10th. Market makers, burned by the crash, have been slow to return. Their funding arbitrage (earning steady returns from long-short spreads) collapsed from profitable levels to below 4%, making their business model temporarily unprofitable.

Long-term damage: Many analysts agree with Xu's assessment that October 10th's damage exceeded FTX. While no major platforms went bankrupt, the event fundamentally altered crypto market microstructure. Trust in exchange systems, particularly Binance's, has been damaged. Without resolution, conspiracy theories continue circulating, weighing on sentiment and preventing healthy recovery.

Drying Up the Trenches: October 10th's Hidden Casualties

Beyond the headline $19 billion liquidation figure lies October 10th's hidden consequence: the event wiped out crypto's most seasoned and advanced traders, creating a secondary liquidity crisis that particularly devastated Solana's memecoin-focused ecosystem as well as professional market makers.

The Professional Trader Exodus

October 10th did not just liquidate retail traders – it decimated professional market makers, sophisticated traders and the very participants who provided liquidity to speculative markets. Even conservative traders who used 1.5x leverage would have been liquidated during the flash crash if they were using USDe as their collateral. This meant that many experienced operators running supposedly hedged strategies were caught in the cross margin death spiral.

The Failure of Delta Neutral Strategies

Delta neutral trading positions (shorting and longing a position in equal amounts) is a widely accepted trading strategy employed by market makers and sophisticated traders. Under normal circumstances, this was a completely sound trading strategy, but the flash crash caused profitable short positions to be closed (through auto-deleveraging), causing losses from long positions to go on unchecked. The event proved that further usage of this strategy may now not be viable.

Solana Specific Impact

The price of SOL has declined from local peaks of ~$228 on October 9th to ~$104 in February 2026. On a yearly price returns basis, SOL was the weakest top 5 coin. Solana suffered disproportionately because its memecoin ecosystem depended heavily on speculative traders, the same type of traders who were trading on perpetual exchanges.

Memecoin market capitalization collapse: Our report showed that the total market capitalization of the memecoin sector declined from ~$80 billion on October 10th to ~$47 billion at the end of 2025.

Memecoins need degen liquidity: Unlike Bitcoin or Ethereum, which have institutional spot buyers, memecoin markets require constant speculative capital from risk-seeking traders. When those traders disappeared (or wiped out), so did memecoin liquidity.

Why Seasoned Traders Couldn't Return

The "drying up the trenches" wasn't just about losing money — it was about the psychological and capital destruction of the strategies that made these markets function:

Capital destruction: Professional traders running neutral strategies with 10-20x leverage were wiped out completely. Unlike retail traders who might lose $1,000-10,000, these operators lost their entire trading capital. They can't just "reload" and come back.

Trust shattered: Advanced traders understood the risks of leverage but believed their risk management systems, hedges, and understanding of exchange mechanics would protect them. When cross margin, auto deleveraging (ADL), and exchange outages destroyed even "properly hedged" positions, trust in the infrastructure evaporated.

Profitability disappeared: Market makers who survived saw their business model collapse. Funding arbitrage yields fell from profitable levels to below 4%. Order books stayed thin, making market-making unprofitable and risky. Why return to a market where the infrastructure can destroy you regardless of your sophistication?

Regulatory pressure: Surviving professional traders faced the looming threat of leverage caps, stricter KYC requirements, and increased regulatory scrutiny that would make their strategies less viable.

Why This Matters More Than The Crash Itself

The immediate $19 billion liquidation was dramatic, but the permanent destruction of the sophisticated trader class explains why crypto hasn't recovered:

Liquidity is people, not algorithms: Markets need diverse participants — market makers, arbitrageurs, momentum traders, value buyers. October 10th eliminated multiple entire cohorts, leaving markets dominated by bots and scared retail.

The recovery depends on them: For crypto to truly recover — not just price, but volume, innovation, and cultural energy — it needs this sophisticated trader class to return. But why would they? They were liquidated by a system that proved it can't handle stress, their strategies are less profitable, and regulatory threats loom.

October 10th's real legacy isn't the $19 billion liquidated in one day — it's the permanent loss of the human infrastructure that made crypto markets function. The trenches dried up, and months later, they remain empty.

Historical Context

October 10th dwarfs previous crypto liquidation events:

• March 2020 (COVID crash): ~$1 billion over 48 hours (19x smaller)

• May 2021 (China mining ban): ~$10 billion (2x smaller)

• November 2022 (FTX collapse): ~$1 billion direct liquidations (19x smaller, though total ecosystem losses exceeded $8 billion)

• February 2025: ~$2 billion (9.5x smaller)

What makes October 10th unique is its combination of massive scale, extreme speed (70% of damage in 40 minutes), and the fact it was purely mechanical leverage unwind — not fraud or insolvency. Yet months later, the industry still can't agree on root causes.

Lessons for Traders

October 10th provides critical lessons:

1. Understand what you're trading: USDe isn't USDT. Synthetic stablecoins with yield-generation mechanisms carry fundamentally different risks than dollar-backed stablecoins. High yields on "stablecoins" should trigger immediate skepticism.

2. Leverage loops are death traps: Using collateral to borrow more of the same asset to earn yield is a classic trap. When depegs occur, these loops unwind violently.

3. Avoid using Cross-margin: When trading perpetuals, stick to “isolated margin” mode so that losses are limited to each trading position and not the entire balance of your trading account.

4. Exchange risk is real: Not all exchanges handle stress equally. Binance's internal oracle pricing allowed USDe to depeg 35% while other exchanges showed minimal deviation. Understanding your platform's risk management systems isn't optional.

5. Weekend leverage is extra dangerous: October 10th began Friday evening into Saturday. Liquidity was already 30-40% thinner. Reduce leverage before weekends.

6. Monitor funding rates: When funding rates exceed 20-30% annualized (as they did reaching 30% by October 6), it's a flashing red warning that longs are overcrowded.

7. Don't trust promotional yields: Binance's 12% APY on USDe was a user-acquisition campaign—temporary and designed to attract capital. High promotional yields often hide structural risks.

Regulatory and Broader Implications

October 10th will accelerate regulatory intervention:

Leverage caps coming: Regulators will likely move to cap retail leverage at 10x-20x maximum, eliminating the 50x-100x ratios that enabled the catastrophe.

Exchange scrutiny intensifying: Infrastructure failures, depegging events, and lack of transparency will prompt demands for third-party audits of liquidation engines, standardized oracle pricing, and disclosure of insurance fund levels.

Calls for investigation: Former CFTC regulator Salman Banaei's call for formal investigation highlights a key problem: crypto lacks the official post-mortems that traditional finance relies on after systemic shocks. Without authoritative findings, conspiracy theories flourish.

Institutional caution: Traditional financial institutions considering crypto exposure will view October 10th with concern, validating critics who argue crypto markets remain too immature for fiduciary capital.

The "trust vacuum": Binance's dominant position (handling the largest share of global derivatives volume) means its reputation problems create market-wide trust issues. As one industry participant noted: "Binance is stuck in the middle of a $19 billion conspiracy theory — and it's killing bitcoin's momentum."

Conclusion

October 10, 2025, stands as crypto's most devastating liquidation event — $19 billion forcibly wiped out, 1.6 million traders liquidated, and a market structure exposed as dangerously fragile. While Trump's tariff announcement triggered initial selling, what followed was amplified by record leverage, thin liquidity, and what OKX's CEO calls "irresponsible marketing campaigns" that created hidden systemic risk.

The bitter public dispute between OKX and Binance reveals a deeper truth: crypto's largest players can't even agree on what broke. Was Binance's USDe promotion creating dangerous leverage loops? Or simply macro shock meeting an overleveraged market? The data suggests both played roles — macro initiated, but structural factors including USDe's Binance-specific depeg amplified the damage.

Nearly four months later, the market hasn't recovered. Bitcoin trades 36% below its peak. Liquidity remains thin. Trust in exchange systems, particularly Binance's, has been damaged. Without authoritative investigation or industry consensus, conspiracy theories proliferate, weighing on sentiment and preventing healthy recovery.

The long-term question remains open: Will October 10th be remembered as crypto's painful but necessary maturation or as evidence that crypto markets remain structurally broken, prone to violent mechanical failures disconnected from fundamental value? The answer may determine whether institutional capital ever truly arrives or whether crypto remains a perpetual casino where the house eventually wins against over-leveraged players.

This article is for educational and informational purposes only and does not constitute financial, investment, or trading advice. Cryptocurrency markets involve substantial risk of loss. Leveraged trading carries extreme risk and you can lose more than your initial investment. The October 10, 2025 event represents an extreme market condition. Always conduct your own research and understand the risks before making investment decisions.