Behind the 20 billion liquidation: What should we know?

# Cryptocurrency Market Hit by Epic Deleveraging Storm on October 10, 2025

Source: cryptoslate  

Compiled by: Blockchain Knight  

On October 10, 2025, the cryptocurrency market was hit by an epic deleveraging storm.  

When zealous long traders were forced to face the unyielding rules of the market head-on, over $20 billion in leveraged positions were liquidated within an hour. Bitcoin plummeted 15% in a single day, liquidity for altcoins nearly dried up, and even seasoned traders were caught off guard by the "bloody market" scenario.  

This "massacre" was triggered by multiple macro-level negative factors: the escalation of trade tensions set off a panic sell-off of risk assets.  

Bitcoin crashed 13% within an hour, and the slippage of altcoins was even more devastating. Tokens such as ATOM nearly plummeted to zero on illiquid exchanges. Although some losses were recovered later, the market had already suffered a heavy blow.  

The total liquidation volume across centralized and decentralized platforms in the entire market exceeded $20 billion, setting a record for the largest single-day liquidation in cryptocurrency history.  

This was no mild, gradual decline—weeks of accumulated bullish sentiment and high open interest evaporated overnight. $65 billion in open positions disappeared from the system, and the market structure reverted to where it was months ago.  

On the surface, it seemed like a "retail rout," but Scott Melker of *The Wolf of Wall Street* and several analysts pointed out the truth: "Those liquidated were not retail investors, but crypto-native traders using leverage on decentralized exchanges. This was a leverage purge targeting the most committed holders."  

Data confirms this: Newly entered funds were mainly allocated to spot ETFs or mainstream assets, avoiding the impact of DeFi leverage mechanisms. The real victims were high-leverage perpetual contract traders, mostly crypto veterans rather than newbies.  

According to Jonathan, a fund manager at Bitwise, the root cause lies in flaws in the market structure. As a zero-sum game, perpetual contracts trigger systemic risks when the solvency of loss-making parties collapses.  

Soaring volatility led to the withdrawal of liquidity providers; thin order books for altcoins caused price collapses; even profitable positions were inadvertently harmed by automatic deleveraging mechanisms.  

Platforms like Hyperliquid profited in reverse through on-chain liquidity pools, buying up assets at a discount amid forced liquidations. By the market close, even market-neutral precision strategies were caught off guard due to operational delays and collateral liquidation issues.  

Centralized exchanges, especially those listing niche tokens, became the hardest-hit areas, while DeFi demonstrated resilience through strict collateral standards and hard-coded pricing mechanisms.  

For example, protocols like Aave require high-quality collateral to avoid the death spiral caused by stablecoin depegging. However, pain points remain: USDe on some exchanges dropped to $0.65, and related margin positions evaporated instantly.  

The $300 price gap across exchanges created opportunities for arbitrageurs, but a more alarming fact is: While $20 billion evaporated, spot buying remained stable.  

Prices rebounded from extreme levels, and excess leverage in the market was forced out. As Jonathan put it, the key to survival lies not only in judging market direction but also in operational capabilities and the art of liquidity management.  

Hunter Horsley, CEO of Bitwise, commented on this: "The largest single-day drop during Bitcoin’s biggest liquidation event was only 15%, demonstrating its inherent strength. This train is unstoppable."  

The growing correlation between cryptocurrencies and the macro environment means that such deleveraging is not only an inevitable market adjustment mechanism but also a necessary pain for reshaping a healthy ecosystem.  

When the cruelty of leverage is laid bare, every participant must remember: Risk control is always more important than chasing profits.  

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