The October 10, 2025 Crypto Crash: What Happened and Why the Market Is Still Feeling It

What was the October 10th crypto liquidation?

The October 10th crypto liquidation was a market-wide event on October 10, 2025, in which more than $19 billion in leveraged cryptocurrency positions were forcibly closed in less than 24 hours. The event triggered sharp price declines across major crypto assets and is considered one of the largest liquidation events in crypto market history.

The immediate trigger was a macroeconomic shock. Reports of escalating tariffs between the United States and China unsettled global risk markets, and crypto, which trades continuously and supports high leverage, reacted rapidly. However, the headline alone does not explain the scale or speed of what followed.

The conditions for a liquidation cascade were already in place. Market leverage was elevated, positioning was crowded in one direction, and a large share of exposure sat within shared margin systems. When prices began to fall, these structural factors amplified losses, transforming a normal market reaction into a self-reinforcing liquidation event.

This article explains what happened in plain terms. It covers how leverage and margin work, why stop-losses failed to protect many traders, how cross-margin systems and liquidity breakdowns accelerated losses, and how exchange risk mechanisms such as automatic deleveraging contributed to the severity of the crash.

What does “liquidation” mean in crypto trading?

To understand liquidation, you need to understand leverage and margin.

What is leverage?

Leverage means trading with borrowed buying power. A trader provides a portion of the position value as margin, and the exchange allows them to control a larger position.

Example:

• You have $1,000
• You use 10x leverage
• You control a $10,000 position

If the price moves 5% in your favour, your profit is roughly 50% on your margin, excluding fees.

If the price moves 5% against you, you lose roughly 50%.

A move of around 10% against you can nearly eliminate your margin, which is where liquidation risk appears.

Higher leverage increases both potential gains and potential losses.

What is margin?

Margin is the collateral posted to open a leveraged position. It absorbs losses as price moves.

• If the trade is profitable, margin increases
• If the trade loses value, margin decreases

Exchanges set a minimum required buffer called the maintenance margin. If margin falls below this level, the exchange intervenes.

What is liquidation?

Liquidation occurs when the exchange forcibly closes a leveraged position because the trader’s remaining margin is insufficient to keep the position open. When liquidation happens, the margin allocated to that trade is lost.

In most cases, liquidation follows this sequence:

1. A trader opens a leveraged position, often using perpetual futures
2. Price moves against the position
3. Margin falls below the maintenance requirement
4. The exchange forcibly closes the position to limit further loss

Why liquidations cause sudden price drops

Liquidations are not discretionary trades. They are automatic market orders executed immediately.

When many traders are positioned in the same direction, a small price move can trigger the first wave of liquidations. Those forced sales push prices lower, triggering additional liquidations.

This creates a chain reaction:

• Price declines
• Liquidations execute
• Forced selling increases
• More positions reach liquidation thresholds
• Selling pressure accelerates

This is how relatively small price moves can rapidly escalate into sharp market drops.

Perpetual futures and liquidation risk

Perpetual futures are a common leveraged product in crypto. They allow traders to go long or short with leverage without an expiry date.

They are liquid and widely used, which makes them efficient in normal conditions. However, when leverage becomes concentrated, even small price movements can trigger large-scale forced liquidations through perpetual futures markets.

Why stop-losses failed on October 10th

A stop-loss is an order designed to close a position once price reaches a specified level, without the trader needing to act manually.

Under normal conditions, stop-losses often work as expected. On October 10th, many traders found that they did not.

There were two main reasons:

1. Many stop-losses in crypto are stop-limit orders, not guaranteed exits. When the stop price is reached, a limit order is placed. In fast-moving markets, price can move past that limit before the order executes.
2. During the liquidation cascade, liquidity collapsed. There were very few buyers near stop levels, so orders either filled far below expectations or did not fill at all.

For leveraged traders, this delay was critical. While stop-loss orders waited to execute, margin continued to decline, and many positions were liquidated by the exchange before the stop-loss could close them.

What triggered the October 10th liquidation?

The immediate catalyst was news of escalating trade tariffs between the United States and China, which unsettled global risk markets. Crypto reacted quickly.

However, this was only the trigger. The underlying conditions were already fragile:

• Elevated perpetual futures open interest in BTC and ETH
• Rising funding rates, indicating crowded long positioning
• Significant exposure concentrated in cross-margin (unified margin) systems

What is cross margin or unified margin?

When trading with leverage, exchanges typically offer two margin types:

Isolated margin Each position has its own collateral. Losses are limited to the margin allocated to that trade.

Cross margin (unified margin) All positions share a common collateral pool. Profits and losses across positions affect the same margin balance.

Cross margin increases capital efficiency, but it also increases shared risk.

Why unified margin increases liquidation risk

In fast market moves, losses often occur across multiple assets at once. When collateral values fall at the same time as positions move against traders:

• Margin declines across the entire account
• Multiple positions draw from the same shrinking buffer
• Accounts that appeared safe minutes earlier fall below maintenance margin

In these cases, exchanges may liquidate several positions simultaneously. This makes account-wide liquidation more likely during periods of high volatility, and it impacted almost all tokens across all different blockchains.

How a stablecoin dislocation worsened the collapse

During the most volatile period, a delta-neutral stablecoin called USDe briefly traded in the mid $0.60 range on Binance, while remaining closer to $1 on other exchanges and DeFi platforms.

Many trading systems value collateral using venue-specific pricing. As a result:

• Accounts holding USDe on affected platforms saw margin values drop immediately
• Positions crossed maintenance thresholds unexpectedly
• Additional liquidations were triggered

This occurred even though USDe remained closer to its intended value elsewhere.

Automatic deleveraging (ADL) and market instability

During extreme moves, exchanges must also manage their own solvency.

When liquidations cannot execute quickly enough, losses may exceed trader collateral. To prevent absorbing those losses, some exchanges use automatic deleveraging (ADL).

ADL forcibly closes or reduces positions on the opposite side of the market, often those that are profitable and highly leveraged. On October 10th, ADL reduced market liquidity further and caused some correctly positioned traders to lose exposure during the most volatile period.

How long did it take the market to collapse?

Earlier on October 10th, prices were already drifting lower. Leverage remained in the system, and liquidation thresholds were approaching.

According to Amberdata’s analysis, the market reached a tipping point when multiple liquidation levels were hit at once.

Key figures:

• Approximately $3.21 billion liquidated in a single minute around 21:15 UTC
• Roughly 70% of total liquidations occurred within about 40 minutes

Once this point was reached, the market transitioned from gradual selling to concentrated forced liquidation.

Why the effects lasted beyond October 10th

October 10 marked the beginning of a broader period of weakness, and the markets have yet to recover. The price of SOL was around $220, and now sits around $135 at the time of writing this post.

• Total crypto market value fell from about $4.2 trillion in early October 2025 to around $3.2 trillion by January 2026
• Leverage, trading activity, and confidence took weeks to stabilise

Infrastructure providers described the event as a stress test. Some platforms experienced operational issues, and transaction fees on Ethereum and its scaling networks spiked sharply as users rushed to manage risk.

Key facts: October 10th crypto liquidation

• Date: October 10, 2025
• Total liquidations: ~$19–20 billion (some estimates up to ~$30B)
• Largest single-minute liquidation: ~$3.21B
• Primary trigger: US–China tariff escalation headlines
• Amplifying factors: high leverage, cross margin, liquidity collapse, USDe pricing dislocation
• Market impact: ~$1 trillion reduction in total crypto market value by January 2026

The bottom line

The October 10th liquidation was not an isolated incident. It demonstrated how leverage, shared margin systems, fragmented pricing, and exchange risk controls can interact to turn a normal market shock into a large-scale liquidation cascade.

For traders, the safest approach is to use lower leverage, maintain margin buffers well above minimum requirements, and avoid reliance on a single platform or collateral asset. Risk management should assume that liquidity and execution can degrade rapidly during extreme market stress.

Not financial advice. For educational purposes only.