According to data from CoinGlass, a leading crypto analytics firm, over 1.6 million traders witnessed a staggering $19.37 billion in leveraged positions liquidated within 24 hours starting October 10th. This marks the largest single-day liquidation event ever recorded. The collapse stands as a rare blemish in an otherwise bullish year for digital assets, where Bitcoin and Ether had consistently reached new highs. Despite over a week passing, the ripple effects persist, with smaller cryptocurrencies bearing the brunt of the impact.
CNBC’s analysis, based on CoinMetrics data, reveals that Bitcoin and Ether are currently trading approximately 11% to 12% below their October 10th peaks. Bitcoin remains above the critical $100,000 resistance level, while Ether hovers around the key $4,000 mark. In contrast, lesser-known coins like XRP, Solana, Dogecoin, and BNB are trading 15% to 24% below their recent highs.
Frank Chaparro, Head of Content and Special Projects at GSR, explained to CNBC that Bitcoin and Ether’s superior resilience stems from their established positions within the crypto ecosystem. “They are larger, more entrenched assets, backed by ETF ecosystems and structured financial products,” Chaparro noted. “Smaller coins have lower liquidity and are naturally more volatile.”
Chaparro highlighted that during this month’s liquidation event, Bitcoin and Ether lost only 11% and 13%, respectively. In contrast, according to market maker Wintermute, mid- and small-cap digital assets plummeted by 60% to 80% at the peak of the turmoil.
“Leverage is deeply embedded in the crypto market,” Tom Lee, Head of Research at Fundstrat Global Advisors, told CNBC last week. “The volatility and leverage are what draw people to this space, especially beyond Bitcoin and Ethereum.”
Leverage allows traders to control larger positions with a fraction of the capital by borrowing from exchanges. When market movements turn unfavorable, and the collateral value falls short, positions are liquidated—exchanges automatically close trades to prevent further losses.
The Downward Spiral
The crypto crash was triggered by former President Donald Trump’s October 10th announcement of “massive” tariffs on China, which sent shockwaves across global financial markets. While crypto markets are accustomed to geopolitical volatility, investors suffered disproportionately due to the cascading effect of mass liquidations.
“This is known as a downward spiral—an initial price drop triggers liquidations, which, when forced onto an illiquid market, cause prices to plummet further,” Chaparro explained.
This decline prompts exchanges to reevaluate investors’ collateral, leading to more liquidations. “Imagine using one bitcoin as collateral when it’s worth $100,000—its value changes drastically when bitcoin drops to $70,000. Accounts then lack sufficient collateral, perpetuating the liquidation cycle,” Chaparro added.
“This mechanism fuels the fire, a rare occurrence even in highly leveraged markets,” the expert emphasized.
Crypto Leverage Reaches 1,001x
Both within and outside the U.S., investors now have unprecedented access to crypto markets. Last year, the U.S. government approved numerous spot Bitcoin ETFs and Ether-tracking funds. Subsequently, issuers launched products offering double or triple leverage on these assets’ price movements.
Internationally, decentralized exchanges like Hyperliquid and Aster (affiliated with Binance Labs) attract traders seeking even higher leverage. Hyperliquid offers up to 40x leverage on Bitcoin and 25x on Ether, while Aster provides staggering leverage of up to 1,001x for select tokens.
High-leverage trading products entice investors with the promise of outsized gains. However, Zach Pandl, Head of Research at asset manager Grayscale, warns that greater rewards come with exponentially higher risks. “The higher the leverage, the greater the risk—this holds true across all financial markets,” Pandl told CNBC.
Chaparro also pointed out that the infrastructure supporting leveraged crypto trading remains underdeveloped for this market’s unique demands. “We have a 24/7 market built on traditional exchange infrastructure that operates from 9 to 5. Crypto lacks traditional safeguards like circuit breakers to halt or mitigate stress,” he explained.
“This liquidation event is a microcosm of the broader value and utility of digital assets, but it’s a stark warning about the fragility of the global derivatives market infrastructure,” Chaparro concluded.
What’s Next for the Market?
Crypto researcher Molly White suggested on her blog that the October 10th liquidation could foreshadow future volatility, not just in crypto but across traditional finance. “The collapse reminds us how swiftly crypto markets can turn when a shock punctures traders’ euphoria from steady price gains,” White wrote on October 17th. “As crypto becomes more intertwined with mainstream finance, future crashes will have far-reaching consequences.”
Juan Leon, Senior Investment Strategist at Bitwise, warned of potential “large corrections or bear markets driven by massive liquidations from excessive leverage.” However, unlike White, Leon believes increasing institutional involvement could mitigate negative impacts from highly leveraged retail traders.
“More capital in this ecosystem is now controlled by professional institutions rather than individual traders,” Leon observed. “As institutional money flows in, risks diminish significantly, as large institutions avoid 50x leverage and favor long-term strategies.”
– 09:48 23/10/2025
