The crash was triggered by President Donald Trump’s announcement of 100% tariffs on Chinese imports. This led to a global sell-off in risk assets, including U.S. equities and cryptocurrencies.
This sudden crypto market downturn caused significant losses across various platforms, with many altcoins briefly hitting zero.
NOT a normal pullback!
Friday’s crypto crash wiped out around $19B in leveraged positions – a true Black Swan event.
Leverage imploded. Liquidity vanished.
Some assets broke… others held strong.Here’s what the data shows about who/how some tokens survived the storm 👇🧵 pic.twitter.com/NswM1gB0Zc
— Crypto Banter (@crypto_banter) October 13, 2025
The Chain Reaction: From Geopolitical Tensions to Crypto Turmoil
According to analyst Jiang Zhuoer, the market crash was set off by Trump’s tariff announcement, which led to a sharp decline in U.S. equities, notably the Nasdaq, which fell by 3.56%. This decline spilled over into the cryptocurrency market, affecting major assets like Bitcoin and Ethereum. However, the impact on these assets was less severe compared to the May 2021 crash, indicating increased capital inflows and lower volatility, but also higher leverage, making the system more fragile.
Investors are waking up to some major news from China:
The entire tariff crash on October 10th may have just been one big misunderstanding between Trump and Xi.
The news about China’s rare earth export controls came out on October 9th at ~8:30 am ET, 26 hours BEFORE Trump…
— The Kobeissi Letter (@KobeissiLetter) October 12, 2025
A critical factor in the crash was the depegging of Binance’s synthetic stablecoin, USDe. At around 5:20 a.m., users chasing Binance’s 12% annual yield on USDe swapped idle USDT for USDe and panic-sold during the crash, causing USDe to fall to a low of $0.65. This depegging triggered liquidations of leveraged positions, particularly those using wrapped tokens like wBETH and bnSOL as collateral.
Did Ethena Really Depeg?
I’ve seen a lot of chatter about the Ethena depeg during the market mayhem this weekend. The story is that USDe briefly depegged to ~68c before recovering. Here’s the Binance chart everyone is quoting:
But digging into the data and talking to a bunch of… https://t.co/ln0fEeVc5E pic.twitter.com/lQuZrQbL7f
— Haseeb ＞|＜ (@hosseeb) October 12, 2025
Binance’s Response and Industry Impact
In the aftermath, Binance announced a historic $283 million compensation plan to reimburse users affected by the crash. The compensation aims to cover the difference between the liquidation price and the market price at midnight on October 11. Binance also acknowledged flaws in its pricing models and collateral systems, introducing soft price floors and enhanced transparency measures to prevent future incidents.
Due to significant market fluctuations over the past 16 hours and a substantial influx of users, some users have encountered issues with their transactions. I deeply apologize for this. If you have incurred losses attributable to Binance, please contact our customer service to… https://t.co/9Q7GZuFY5H
— Yi He (@heyibinance) October 11, 2025
The crash had widespread effects across the crypto ecosystem. On decentralized platforms like Hyperliquid, over 1,000 wallets were completely wiped out, with total losses exceeding $1.23 billion. In contrast, decentralized finance (DeFi) platforms like Uniswap and Solana’s Jupiter aggregator profited significantly, capturing millions in fees during the market turmoil.
JUST IN: Over 1,000 wallets on Hyperliquid wiped out in market crash, 6,300+ wallets with losses exceeding $1.23B, 205 wallets lost over $1M and 1,070+ lost over $100K. pic.twitter.com/3rRTA1rb3n
— Whale Insider (@WhaleInsider) October 11, 2025
The event also highlighted systemic risks associated with cross-margin trading and the use of synthetic assets as collateral. Analysts noted that under cross-margin setups, losses from futures positions can spill over into spot holdings, amplifying liquidation contagion. Additionally, the depegging of synthetic assets like USDe, wBETH, and bnSOL exposed vulnerabilities in pricing mechanisms and collateral valuation models.
Update on USDE, BNSOL, and WBETH price depeg and next steps
👉 https://t.co/Q5BNjMs5ZX pic.twitter.com/LEaiL4nVVD
— Binance (@binance) October 11, 2025
Looking Ahead: Lessons and Precautions for Investors
The October 11 crash serves as a stark reminder of the risks inherent in the cryptocurrency market, especially concerning leverage and synthetic assets. Investors are advised to exercise caution, maintain diversified portfolios, and stay informed about platform risk management practices. While the market has shown signs of recovery, the event underscores the importance of robust infrastructure and transparent practices in mitigating systemic risks.
Disclaimer
The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment, and informational purposes only. Any information or strategies presented are the thoughts and opinions of the writer/reviewers, and their risk tolerance may differ from yours. We are not responsible for any losses you may incur due to any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments; therefore, please conduct your due diligence. Copyright Altcoin Buzz Pte Ltd.
The post Historic Liquidation Hits Crypto Market: Causes, Impact, and Recovery appeared first on Altcoin Buzz.
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This articles is written by : Nermeen Nabil Khear Abdelmalak
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