The crypto market faced its most severe liquidation event on October 10, 2025, erasing over $19 billion in leveraged positions. This downturn exposed fragilities in centralized finance systems amid rising U.S.-China trade frictions. Experts attribute the plunge to a blend of geopolitical pressures and overextended borrowing.
The Tariff Spark and Initial market Reaction
President Trump's announcement of 100% tariffs on Chinese imports ignited widespread selling across assets. The policy, set for November 1 if unmet demands persist, raised fears of economic fallout.
bitcoin dropped 8.4% to $104,782, while the broader shed about $400 billion in value.
Effects on Key Cryptocurrencies
ethereum declined 5.8% to $3,637, and XRP fell 22.85% to $2.33. Smaller altcoins experienced even steeper losses, some briefly crashing over 99%.
Data indicates 1.6 million traders suffered liquidations, primarily from long positions.
leverage as the Amplifying Force
High in CeFi turned a policy shock into a cascade of forced sales. Positions built on borrowed funds magnified declines as prices hit margin thresholds.
Vincent Liu from Kronos Research noted the event stemmed from tariff concerns but gained momentum through institutional over-leverage.
David Jeong of Tread.fi described it as a black swan, emphasizing how perpetual futures intensified trader losses.
Uncovering the CeFi Platform Vulnerability
A potential exploit on a major CeFi worsened the turmoil. Actors dumped $60-90 million in synthetic stablecoins, causing a temporary depeg and triggering widespread margin calls.
Binance's reliance on internal order book pricing for collateral created this opening, exploited amid thin liquidity.
Concurrently, $1.1 billion in shorts on another platform yielded $192 million in gains, suggesting timed coordination with the tariff news.
exchange Responses and Trader Impacts
Binance absorbed $283 million in user losses from the depeg and vowed to implement oracle-based pricing to prevent repeats.
Exchanges like and Coinbase faced temporary freezes due to overload, locking out retail users while automated systems continued.
Broader market Trends and Recovery Signals
This incident highlights growing leverage in CeFi, with open interest hitting peaks before the wipeout. Decentralized alternatives gained traction as users sought resilient options.
Whales and institutions accumulated during the dip, viewing it as a correction in an ongoing bull trend.
Analysts warn of contagion if trade tensions escalate, but spot demand could stabilize prices if leverage rebuilds cautiously.
Lessons for Crypto market Participants
Traders should prioritize risk management, using lower leverage to weather shocks. Diversifying across CeFi and DeFi reduces single-point failures.
Monitoring geopolitical developments remains essential, as policy shifts can swiftly influence market dynamics.
This $19 billion crash reminds investors that leverage and external events often intersect destructively in crypto markets. Navigating these requires analytical vigilance to turn volatility into opportunity.
