October 11th was a day for the crypto history books. On this day, the crypto market saw over 1.6 million investors liquidated, with $19.3 billion in liquidations. Bitcoin fell by 13%, Ethereum plummeted by 17%, and altcoins crashed by up to 85%, with many smaller coins experiencing wick movements to zero. It was a devastating, apocalyptic market scenario. However, just recently during the National Day holiday, Bitcoin had just hit a new high of $126,200, BNB surged towards $1300, and the crypto market was showing vibrant growth.
In summary, tight liquidity, macro black swan events, and the industry's characteristic high leverage intertwined, ultimately leading to a disaster. Exchanges were also a significant contributing factor.
The crypto market became the epicenter of the crash. BTC flash-crashed to $101,500, ETH dropped to $3,373, small-cap altcoins fell by over 90%, and the total network liquidation volume exceeded $20 billion, plunging the market into extreme panic.
After the event, two types of tokens were frequently discussed. First, the collateralized W-series tokens: on that day, the liquidity for WBTC, WBETH, and WBSOL on Binance was completely wiped out. WBTC dropped to a low of $35,000, WBETH fell to $430.65, and WBSOL even broke below $35. Second, the stablecoin USDe depegged, dropping from $0.99 to a low of $0.62 on Binance, leading to widespread market discussion labeling it the "second LUNA."
But it's worth mentioning that although generated by staking native tokens, their liquidity depth is clearly not comparable. When ETH plummeted rapidly, WBETH, as collateral, was the first to be wiped out. During liquidation, the platform automatically sold WBETH, creating a vicious cycle with no liquidity to absorb the sales. WBETH ultimately fell from above $4,000 to $430, undoubtedly meaning that the vast majority of holders saw their positions go to zero.
But high profits always come with high risks. As the market fell rapidly, arbitrageurs' circular loan positions were liquidated, spot holdings and USDe were sold off, oracles lowered collateral valuations, collectively triggering large-scale forced liquidations, ultimately evaporating $19.3 billion in a liquidity vacuum. This scene is not unfamiliar in the crypto market; before USDe, the algorithmic stablecoin UST had already demonstrated the destructiveness of circular loans in extreme market conditions.
The prevalence of conspiracy theories is not without reason. Thirty minutes before the Trump statement that triggered the sharp decline, a whale shorted 6,189 BTC with 10x leverage, worth approximately $752.9 million, and shorted 81,203 ETH with 12x leverage, worth approximately $353.1 million. These short positions totaling $1.1 billion successfully profited $190 million within 24 hours. On-chain investigators believe the whale's true identity is Garrett Jin, the former Chinese CEO of BitForex. On-chain detective ZachXBT posted, "Garrett Jin appears to have started collaborating with a Chinese whale who previously had nine-figure funds dormant on-chain until recently activated." According to Garrett's latest response, he stated the fund belongs to his own clients, he has no relationship with the Trump family or Donald Trump Jr., and clarified that this was not an insider trade.
The turnaround came quickly. In the early hours of this morning, Trump posted again to calm the market, saying, "Don't worry about China, everything is going to be just fine. America wants to help China, not hurt China," successfully restoring market confidence. This statement led the market to collectively bet on the "TACO" trade, an acronym for "Trump Always Chickens Out," pointing directly to Trump's outward strength but inner weakness. The trading strategy involves investors betting that he will ultimately back down when his tariff threats cause market declines, leading to a stock market rebound, allowing investors to profit by buying the dip.
Influenced by this, crypto assets quickly rebounded. Bitcoin returned above $115,000, ETH once broke through $4,200 and is currently trading at $4,186, and BNB's performance was particularly pleasing, rising over 15% to set a new high of $1,351.
Judging from the responses of domestic and foreign officials, the tariff crisis is likely another macro event "with much thunder but little rain." But behind this incident, who should the liquidated retail investors seek redress from? How should the resulting pain be soothed? In the end, it seems only the lesson learned through bloodshed remains.
