The crypto industry recently saw a massive liquidation event, with over 1.6 million traders losing $19.37 billion in leveraged positions. Bitcoin and ether are trading 11-12% below their Oct. 10 highs, while smaller coins like XRP, solana, dogecoin and BNB are down 15-24%.
Bitcoin and ether fared better in the liquidation event compared to other crypto-assets due to being more established. Lesser-known coins like solana, dogecoin, XRP and BNB experienced larger losses, falling 60-80% at the peak. Bitcoin and ether only lost 11-13%, according to market maker Wintermute.
Leveraged trading on midcap and small-cap assets led to significant losses during the liquidation event. Fundstrat Global Advisors’ Tom Lee highlighted the attraction of leverage in crypto, especially outside of bitcoin and ethereum, which are generally not held on margin.
The recent crypto wipeout followed U.S. President Donald Trump’s announcement of “massive” tariffs on China. The unwinding of leveraged positions created a “doom loop,” triggering more liquidations as prices dropped. This cycle caused a significant impact on traders and exchange margin systems.
Crypto traders are increasingly using leverage, with some exchanges offering up to 1,001x leverage. While higher leverage can lead to greater returns, it also increases the risk of significant losses. The lack of infrastructure for leveraged trading in crypto markets poses challenges during volatile events.
Crypto researcher Molly White warns that the Oct. 10 liquidation event could signal future crashes in the crypto market. As crypto becomes more intertwined with traditional finance, widespread impacts of crashes may be felt. However, some believe that the entrance of traditional financial institutions could help offset the effects of leverage in the market. 1. The stock market experienced a sharp decline today, with the Dow Jones Industrial Average dropping 500 points due to concerns over rising inflation and interest rates.
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1. The stock market saw a sharp decline today, with the Dow Jones dropping 500 points due to concerns over rising inflation and interest rates.
2. Tesla reported record-breaking profits for the second quarter, surpassing analyst expectations and driving the stock price up by 5%.
3. The Federal Reserve announced plans to gradually raise interest rates over the next couple of years to combat inflation and support economic growth.: The biggest crypto wipeout was led not by bitcoin, but much smaller tokens. Here’s what happened