The Largest Crypto Liquidation Event in History & Extreme Fear in the Market

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This Week’s Top Stories

“Morgan Stanley announced that it will allow all clients to invest in crypto funds across any account type starting October 15.” – Friday, 10 October 2025 

• Morgan Stanley informed its financial advisors last Friday that the firm is opening access to crypto investments for all clients and will allow such investments in any type of account, including retirement accounts.
• Starting October 15, advisors will be able to offer crypto funds to any client. The company also noted that cryptocurrencies have become an increasingly popular asset class that many investors are eager to explore.
• Additionally, Citibank announced plans to launch crypto asset custody services next year, alongside potential plans to issue its own stablecoin in the coming years. The increasingly favourable regulatory environment in the U.S. has prompted American banks to expand their crypto service offerings since the beginning of this year.

“Trump threatens to impose an additional 100 percent tariff on China after a strongly worded letter to the international community last Friday.” – Friday, 10 October 2025 

• Last Friday, U.S. President Trump said in a post on X that he would impose an additional 100 percent tariff on imports from China starting next month, following China’s move to tighten its rules for rare earth exports. Trump also threatened to pull out of a meeting with President Xi Jinping but then quickly “taco’d” hours later.
• The stock market quickly moved to the downside, with the S&P 500 closing 2.7 percent lower, its steepest decline since April this year.
• Since last Friday, headlines about a potential reignition of the U.S.–China trade war have resurfaced, echoing the back-and-forth seen earlier in April. The U.S. stock market has since recovered most of its losses and is once again approaching new all-time highs.

$20 billion in crypto liquidations during Friday’s crypto crash – the largest liquidation event in crypto history.” – Friday, 10 October 2025 

• The renewed escalation between the U.S. and China triggered the largest liquidation event in crypto history, cutting open interest on Hyperliquid and Lighter, two on-chain perpetual exchanges, in half. Over $20 billion in crypto positions were liquidated within a matter of hours during Friday night’s crash.
• The crash not only exposed the immense amount of leverage in the system but also revealed that most altcoins lack deep order books and are artificially propped up by market makers. Market participants likely also realized that there is far less fresh capital in crypto than the recent price action had led many to believe.

A Quick Crypto Overview: $20 Billion in Liquidations on Friday – Crypto Continues to Trade Lower

After last Friday’s historic liquidation event, the crypto market continued to trade lower this week, following a short-lived recovery over the weekend into Monday. While Bitcoin, Ethereum, and Solana corrected between 15 and 25 percent during Friday’s crash, other altcoins traded significantly lower, with some losing more than 70 percent of their value within just a few hours. 

Looking at the top 100 crypto assets, most are currently down between 20 and 50 percent over the past seven days, with SOL down 18 percent, DOT down 30 percent, ADA down 25 percent, and DOGE down 27 percent. 

The recent liquidation event was multiple times larger than the previous record numbers from the 2021 bull market, and a significant amount of leverage has now been wiped out of the market. With sentiment deep in extreme fear, the question is whether this liquidation event and peak bearish sentiment could signal a potential bottom formation around these levels. The market will certainly need some positive headlines to revive buying activity and restore confidence. 

The chart below illustrates the magnitude of Friday’s liquidation event compared to the previous six months.

Chart of the Week: Crypto is a Mere 1 Percent of the World Portfolio

While the sentiment currently is very bad and many market participants are likely to question their positions in the crypto market it’s important to take on a bigger picture look. The crypto market is still only roughly 1 percent of the total world portfolio and with major banks and financial institutions starting to open their doors to crypto, this number is very likely going to increase over the next couple of years, this is a process which does not happen overnight and paints a rather positive outlook for the future.

In addition, it’s interesting to note that 94 percent of crypto buyers are between the ages of 18 and 40. Given this, there is potential for trillions of U.S. dollars to flow into crypto over the next two decades as part of the great wealth transfer through inheritance. As the chart below shows, nearly $70 trillion in wealth will be passed down to Gen X, millennials, and Gen Z over the next twenty years.

What’s Happening Onchain? Kalshi vs Polymarket, Hyperliquid

After last week’s Polymarket announcement, its TradFi rival Kalshi also announced a new funding round of over $300 million, valuing the company at $5 billion. Kalshi further revealed plans to expand its services to clients in more than 140 countries worldwide, with trading volumes on track reaching $50 billion, up from just $300 million last year. 

Friday’s crypto crash also made headlines for on-chain perpetual exchanges such as Hyperliquid and Lighter. While centralized exchanges like Binance suffered outages and had to refund users, Hyperliquid maintained 100 percent uptime, proving its resilience during the extreme volatility. According to data from various sources, Hyperliquid processed over $10 billion of the total $19 billion in liquidations, highlighting the major role it plays in the market but also raising questions about the accuracy of reported liquidation figures on CEXs, as well as their overall credibility and transparency. 

In other news, the Ethereum Foundation announced that it has deposited 2’400 ETH and approximately $6 million in stablecoins into Morpho’s yield-bearing vaults in an effort to engage more actively with DeFi and support on-chain builders. 

On a lighter note, Paxos mistakenly minted 300 trillion PYUSD on Wednesday during an internal transfer. The mint quickly made headlines, leaving many market participants wondering what had happened. Paxos clarified shortly after that the mint was a mistake and fully burned the excess tokens roughly 20 minutes later, attributing to a technical error and confirming that no systems were compromised and that all funds remained secure. 

Digital Asset Fund Flows: Outflows This Week After a Record Week in Crypto Market Fundraising

Last week, digital asset investment products saw more than $3 billion in net inflows, with trading volumes hitting all-time highs as weekly ETP volumes crossed $53 billion. Most of the inflows went into Bitcoin ($2.67 billion), while Ethereum products attracted $338 million, followed by Solana with $93 million and XRP with $61 million. 

Trump’s comments on China and the newly announced 100 percent tariff came after the market closed on Friday night and were likely the reason for the $320 million in net outflows from the Bitcoin spot ETFs at the start of the new week on Monday ($430 million in net outflows for the Ethereum spot ETFs). So far this week, Bitcoin spot ETFs have seen roughly $800 million in net outflows, while Ether spot ETFs have lost about $300 million. 

Last week not only saw a new all-time high in trading volume but also in crypto market fundraising, which reached a record $3.5 billion between October 6 and October 12. The most active investors during this period were Pantera Capital with four deals, followed by Coinbase Ventures and VanEck with two each, and Jump Capital, Andreessen Horowitz, Galaxy, and Delphi Ventures with one round each. Andreessen Horowitz led the Series D funding round for Kalshi alongside Sequoia Capital, valuing Kalshi at $5 billion, following Polymarket’s partnership announcement with ICE last week.

In other news, BlackRock CEO Larry Fink stated in his Q3 shareholder letter that half of the demand for BlackRock’s Bitcoin ETF has come from retail investors, and three-quarters of those investors had never owned an iShares product before. This is noteworthy, as many observers have viewed ETF flows primarily as a sign of institutional adoption. Since BlackRock’s IBIT is attracting the majority of new inflows into the spot ETFs, this data shows that roughly half of the capital is coming from retail participants. 

There was also news regarding governmental Bitcoin adoption in Florida, as State Representative Webster Barnaby introduced House Bill 183 — the first Strategic Bitcoin Reserve proposal of the 2026 legislative session. The bill would authorize the state and local governments to allocate up to 10 percent of public funds to Bitcoin and other digital assets. 

Market Sentiment: Extreme Fear for Crypto and Stock Market 

Market sentiment has shifted dramatically since last Friday, with both the crypto and stock markets now in extreme fear territory after steep declines over a short period of time. Both Fear and Greed Indices have fallen to their lowest levels since April, when the S&P 500, for example, was trading 20 percent lower than today and Bitcoin was below $90’000. 

After last week’s strong shift toward the bullish side, AAII members reversed course this week: the share of bearish members jumped to 46 percent from 35 percent, while bullish members fell to 33 percent from 46 percent. Interestingly, 55 percent of respondents said they believe that stocks in general are currently overvalued. 

Other Relevant News 

• Eric Trump announced that he is collaborating with World Liberty Financial on a real estate tokenization project that may utilize the firm’s USD1 stablecoin. – Link 
• Bridge, Stripe’s stablecoin arm, has applied to the OCC for a national trust bank charter, joining four other applicants seeking federal approval. – Link 
• U.S. President Donald Trump and his family reportedly earned more than $1 billion in pre-tax profits from crypto ventures over the past year. – Link 
• Fed Chair Jerome Powell stated that the Federal Reserve’s balance sheet reduction (QT) could end in the coming months. – Link 
• CME Group has launched options products for Solana and XRP. – Link 

Looking Ahead: What now? 

It remains to be seen whether some dead bodies will begin to come to light over the coming days and weeks following last Friday’s liquidation event. Back in 2022, after the Luna crash, it also took some time before the first reports of bankruptcies became public. It could be that some small- or medium-sized players were hit quite hard and now need to liquidate their remaining holdings to raise cash. Only time will tell how far-reaching the damage truly is. 

With much of the leverage flushed out of the system, market sentiment in extreme fear, and several crypto assets down more than 50 percent, brave market participants may start to think about buying when there is blood in the streets. 

Gold continues to trade higher, reaching new all-time highs again this week. As we mentioned last week, Bitcoin has been following gold’s uptrend with a lag of a few weeks. There remains some hope that Bitcoin and the broader crypto market will begin to trade higher again during the fourth quarter of the year. 

Seasonality certainly supports a bullish end to the year, and Powell’s remarks regarding the likely conclusion of quantitative tightening, along with market expectations of further Fed rate cuts in 2025 and 2026, paint a macro backdrop in which crypto assets have historically performed quite well. 

While it may be difficult to see the light at the end of the tunnel and the bid for altcoins will likely remain muted over the coming weeks, from a higher time-frame perspective the crypto market appears well positioned to grow and benefit from the current structural trends. 

Below, you can find some of the key data releases and events to watch out for next week. 

Sunday, 19 October 2025 

China – GDP 

Japan – BoJ Press Conference 

Tuesday, 21 October 2025 

Eurozone – ECB President Lagarde Speech 

Wednesday, 22 October 2025 

Eurozone – ECB President Lagarde Speech 

Thursday, 23 October 2025 

USA – Initial Jobless Claims 

Japan – National CPI, National Core CPI 

Friday, 24 October 2025 

USA – CPI, Core CPI 

USA – New Homes Sales