{"id":4318,"date":"2025-10-14T08:34:46","date_gmt":"2025-10-14T08:34:46","guid":{"rendered":"https:\/\/tde.fi\/founder-resource\/"},"modified":"2025-10-29T05:39:19","modified_gmt":"2025-10-29T05:39:19","slug":"what-are-the-major-reasons-behind-the-recent-crash","status":"publish","type":"post","link":"https:\/\/tde.fi\/founder-resource\/blogs\/economics\/what-are-the-major-reasons-behind-the-recent-crash\/","title":{"rendered":"What Are The Major Reasons Behind The Recent Crash?"},"content":{"rendered":"\n

Hello readers, we all know a huge liquidation occurred at the end of last week. The crash was caused by a perfect storm of short-term factors<\/strong>, causing around $20 billion in liquidations \u2014 the worst 24-hour drain in crypto history.<\/p>\n\n\n\n

COVID Crash: $1.2B <\/p>\n\n\n\n

FTX Collapse: $1.6B<\/p>\n\n\n\n

Recent Crash: $19.16B<\/p>\n\n\n\n

That’s almost 20x bigger than the 2020 crash<\/strong><\/p>\n\n\n\n

In this Blog, we break down the chain reaction with numbers and points: where the leverage built up and how open interest\/funding primed the move; how oracle issues and pricing errors accelerated it; the role of stablecoin dislocations and liquidity drains; and why treasury risk management (hedging runway, reducing protocol sell pressure) matters when volatility snaps. We\u2019ll also assess user impact, separate signal from noise, and ask what the path forward looks like \u2014 including whether this was structural fragility or a solvable set of weaknesses.<\/p>\n\n\n\n

The Day Liquidity Vanished: Direct Freefall<\/h2>\n\n\n\n

Between late Friday<\/strong> (Oct 10, 2025, UTC) and Saturday<\/strong>, the market registered the largest liquidation event on record by dollar value, with >$19B<\/strong> of positions force-closed in ~24 hours. Within the worst hour, at least $3\u2013$7B flushed as perp engines tried to catch up with a suddenly risk-off macro backdrop. BTC goes below $110k\u2014Reuters printed $104,782 intraday\u2014while large-cap alts shed 15\u201330% in minutes. Coinglass-cited tallies put the headcount of liquidated accounts >1.6M.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Crash scorecard :<\/p>\n\n\n\n

    \n
  • Total forced liquidations: >$19B (24h); \u2265$3\u2013$7B in the peak hour.<\/li>\n\n\n\n
  • Spot drawdowns at lows: BTC -10\u201312%, ETH ~-16%, large alts -20\u201340%.<\/li>\n\n\n\n
  • Global crypto market cap: estimates indicate -$125B to -$400B intraday before partial retrace (vendor differences).  <\/li>\n<\/ul>\n\n\n\n

    Interpretation: this was a macro-spark + leverage-kindling event, magnified by venue-specific plumbing failures.<\/p>\n\n\n\n

    When Policy Becomes Price: Tariff Headlines, Yields, and a Dollar Spike<\/h2>\n\n\n\n

    The spark was political. President Trump threatened a 100%<\/strong> tariff on Chinese imports and new export controls late Friday, escalating after Beijing\u2019s rare-earth curbs. As those posts hit, BTC sold ~$3k in minutes. This is the cleanest timestamped causal channel we have: <\/p>\n\n\n\n

    headline \u2192 dollar\/ rates re-price \u2192 crypto risk premium blows out.  \ufffc<\/p>\n\n\n\n

    \"\"<\/figure>\n\n\n\n

    Bitcoin chart after the tariff news <\/em><\/strong><\/p>\n\n\n\n

    This is not just vibes. Crypto is still treated as high-beta duration: when the dollar strengthens and policy risk spikes, basis widens, funding flips, and levered longs become fuel.<\/p>\n\n\n\n

    \"\"<\/figure>\n\n\n\n

    Source: Cointelegraph<\/em><\/strong><\/p>\n\n\n\n

    But currently, Trade tensions between the US and China appear to be softening, as representatives from both governments issued statements on Sunday that signaled a willingness to resume trade negotiations, giving analysts hope of a market rebound <\/strong>in the current week.<\/p>\n\n\n\n

    Invisible Hand, Visible Glitches: Oracle Manipulation & API\/Display Errors<\/h2>\n\n\n\n

    One of the reasons that caused this huge liquidation is the glitches in Binance platform. BitMEX co-founder Arthur Hayes said that major exchanges, including Binance, were \u201cliquidating collateral tied to cross-margin positions,\u201d which increases the sell-off. Simply put, when prices started falling, Binance automatically sold altcoins<\/strong> used as collateral<\/strong> to cover losses. This caused more selling pressure, which pushed prices down even faster.<\/p>\n\n\n

    \n
    \"\"<\/figure>\n<\/div>\n\n\n

    As prices plunged, Binance\u2019s trading systems became overloaded. Some users reported frozen accounts, missed stop-losses, and delayed trades.
    <\/p>\n\n\n\n

    Two mechanics turned a sell-off into a venue-specific rout:<\/p>\n\n\n\n

      \n
    1. Wrapped\/derivative asset pricing broke on Binance during peak stress.<\/strong><\/li>\n<\/ol>\n\n\n\n
        \n
      • wBETH traded down ~88%<\/strong> to ~$430, BnSOL to ~$34.9, and USDe printed $0.65\u2014on Binance only\u2014before rebounding. Binance has said it will compensate affected users case-by-case and change pricing for wrapped assets to conversion-ratio methods (less reliant on stressed order books).  <\/li>\n<\/ul>\n\n\n\n
          \n
        • Multiple analysts confirm a coordinated exploit against Binance\u2019s \u201cUnified Account\u201d margin system, which referenced internal order-book data rather than deep external oracles for some collateral. These claims remain unproven, but the timing window between Binance\u2019s announced oracle\/price-index changes (Oct 6) and rollout (Oct 14) is a legitimate red flag from a controls perspective.  <\/li>\n<\/ul>\n\n\n\n
            \n
          1. Display\/API issues confused risk further.<\/strong><\/li>\n<\/ol>\n\n\n\n
              \n
            • Binance said several pairs \u201cprinted $0\u201d due to a UI\/display issue tied to tick-size changes, not actual trades at zero\u2014yet in the moment, that screen noise triggers human and algorithmic de-risking.<\/li>\n<\/ul>\n\n\n\n

              Binance co-founder Yi He (Chief Customer Service Officer) issued an apology, saying that \u201csome users have encountered issues with their transactions\u201d amid extreme volatility and surging platform traffic.<\/p>\n\n\n\n

              Everybody is asking \u201cIs Crypto a Scam?\u201d Or Just Early Market Plumbing?<\/h2>\n\n\n\n

              It\u2019s fair to ask hard questions when USDe prints 65 cents on one venue and wrapped assets goes to pennies. But the evidence points to a macro shock interacting with leverage and venue-specific design choices, not some universal fraud:<\/p>\n\n\n\n

                \n
              • Cause hierarchy:<\/strong> tariff headlines with a clear timestamp \u2192 largest dollar liquidation day ever \u2192 venue-specific pricing\/index failures that worsened forced selling.  <\/li>\n\n\n\n
              • Controls evolved in real time:<\/strong> Binance committed to compensation and pricing method changes for wrapped assets within 24h.  <\/li>\n\n\n\n
              • Risk class is known:<\/strong> oracle manipulation is a documented, mitigable risk; detection research is mature and getting better.  <\/li>\n<\/ul>\n\n\n\n

                Scams exist in every asset class; systemic fragility is not the same thing. This episode reads as plumbing failure under stress, not proof the asset class is fake.<\/p>\n\n\n\n

                The Next 90 Days: What the Future Holds<\/h2>\n\n\n\n

                Normal case: Macro cools as rhetoric softens (we already saw a Monday relief bid), but policy headline risk will keep volume sticky. We can expect dominance-heavy rotations, with alts lagging until market-making spreads normalize and OI rebuilds.  \ufffc<\/p>\n\n\n\n

                Watchlist (with actions):<\/p>\n\n\n\n

                  \n
                • Tariff path \/ DXY & 10Y: If DXY = \u201cthe US dollar index\u201d sustains >99\u2013100 and real yields firm, keep treasuries hedged and emissions throttled. Above 100 = stronger dollar, below 100 = weaker.<\/li>\n\n\n\n
                • Venue engineering updates: Always confirm the new feeds are live and your risk tools use them.<\/li>\n\n\n\n
                • Liquidity quality vs. quantity: Track depth @1% and MM quote persistence, not just daily volume.<\/li>\n\n\n\n
                • Stablecoin health: Compare prices across multiple exchanges and design rules so your liquidation logic treats local glitches differently from broad <\/li>\n<\/ul>\n\n\n\n

                  Answering the only question that matters: Will it happen again?<\/p>\n\n\n\n

                  Maybe\u2014macro shocks are inevitable. But the damage can be smaller if treasuries hedge, venues adopt durable index\/oracle design, and protocols add dislocation-aware guardrails. That\u2019s plumbing, not PR. <\/p>\n\n\n\n

                  But there are some positive news, some tokens  like $SNX, $BNB, $ZEC, and $TAO are already trading above their levels from before Friday\u2019s crash, and JUST IN: $220,000,000,000 has flowed back into the crypto market following the crash.<\/p>\n\n\n\n

                  \"\"<\/figure>\n","protected":false},"excerpt":{"rendered":"

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