The cryptocurrency markets were rocked on Friday, October 10, 2025, by one of the most dramatic “flash crashes” in their history.
Within minutes, prices plummeted across the board, triggering forced liquidations on leveraged trades worth a staggering $19 billion, the largest single-day wipeout the crypto industry has ever seen.
Trump’s Tariff Threat Sends Shockwaves
The chaos began after U.S. President Donald Trump reignited trade war fears by threatening 100% tariffs on Chinese imports. The move was a response to China’s tighter export controls on rare earth metals, critical components used in electric vehicles, semiconductors, and military technology.
Markets reacted instantly. Global equities tumbled and risk assets, including Bitcoin and cryptocurrencies, suffered sharp sell-offs.
Bitcoin (BTC), which had been trading near $121,000, plunged to as low as $100,000 on some exchanges before recovering to around $110,000. While the 17% drop was brutal, it was nothing compared to the carnage in the altcoin market.
Altcoins Suffer “Complete Wipeouts”
Some smaller cryptocurrencies briefly traded near zero on Binance, the world’s largest exchange, due to a cascade of liquidations and thin order books. Although prices quickly recovered once liquidity returned, the flash crash exposed serious weaknesses in the market’s structure, especially in times of panic.
For comparison, during major past market shocks, the total liquidations were far lower.
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The COVID-19 crash in March 2020 caused roughly $1.2 billion in liquidations.
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The FTX collapse in 2022 led to about $1.6 billion in liquidations.
Friday’s $19 billion liquidation total dwarfs both events combined, highlighting how much the crypto market has grown in scale, leverage, and complexity.
How Margin Trading Amplified the Crash
A big part of the story lies in the widespread use of leverage: traders borrowing funds to amplify their positions. In crypto, this is often done through margin trading, where a trader deposits collateral (or “margin”) to open a much larger position.
For example, with $1,000 in margin, a trader might control a $10,000 position using 10x leverage. The problem is that if prices move against them by even 10%, their position is wiped out, and the exchange automatically sells (or “liquidates”) it to recover losses.
This creates a dangerous feedback loop: falling prices trigger liquidations, which push prices down even further, causing more liquidations.
During Friday’s crash, that loop spun out of control.
The Stablecoin Problem: USDe Loses Its Peg
To make matters worse, many traders used the Ethena synthetic stablecoin USDe as their margin collateral on Binance. But during the panic, USDe lost its peg to the U.S. dollar on Binance, plunging to $0.65.
This meant that traders’ margin collateral instantly lost 35% of its value, triggering even more forced liquidations.
The depeg of USDe highlights the ongoing risks of algorithmic or synthetic stablecoins, which rely on complex financial engineering rather than real U.S. dollar reserves. However, this time the problem was solely situated on Binance. Still, it’s a painful reminder of past collapses like TerraUSD (UST) in 2022, which wiped out over $40 billion in market value and sent shockwaves through the entire industry.
Market Makers Went Offline
Another crucial factor behind the chaos was the temporary disappearance of market makers: professional traders who provide liquidity by continuously posting buy and sell orders.
As prices fell rapidly and system volatility spiked, several market-making algorithms shut down or reduced activity to avoid losses. This left order books empty, meaning there were no buyers to absorb the sell orders.
In thin markets, even small trades can cause massive price swings. That’s why some lesser-known coins temporarily crashed to near zero, not because they lost their fundamental value, but simply because no one was there to buy.
Bitcoin Proves Its Strength
Despite the turbulence, Bitcoin once again proved its relative resilience. Its massive liquidity and widespread adoption helped it stabilize quickly. Within hours, Bitcoin prices rebounded to around $110,000, restoring some confidence in the market.
Altcoins, however, face a longer road to recovery. Many suffered lasting damage to their charts and investor sentiment.
A Wake-Up Call for the Industry
The October flash crash will likely go down as one of the most dramatic events in crypto history, not just for its scale, but for what it reveals about systemic vulnerabilities.
It exposed:
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Excessive leverage, which makes markets fragile.
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Bugs on exchanges, which lead to USDe depegging under stress on Binance.
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Dependence on market makers, who can vanish when they’re needed most.
Regulators and exchanges are already under pressure to improve risk controls, circuit breakers, and transparency around stablecoins.
For investors, the lesson is clear: leverage can multiply both profits and losses, and in a market as volatile as crypto, even a presidential tweet can erase billions in minutes.
