The Breakdown - The Short, Brutal Bear Market of October ‘25

Episode Date: October 15, 2025

Markets melted down this weekend after Trump’s surprise tariff announcement triggered the largest crypto liquidation in history. Stocks plunged, altcoins went to zero, and suspicions of insider trading swirled — but by Monday, the “bear market” was already over. NLW breaks down what really happened, who might have caused it, and why this flash crash could reshape crypto market structure. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Tuesday, October 14th. And today we are talking about the very short bare market of October 25. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. All right, friends, well, welcome back after a long weekend in the States.

Now, hopefully, you were out enjoying some beautiful fall air and falling leaves. But for those of you who actively trade, I know this was one of the crazier weekends of the cycle. We had a huge liquidation cascade, widespread market turmoil, and numerous tokens going to actual zero. It was a market event unlike anything we've seen since the collapse of Luna or perhaps even the COVID crash in 2020. And, like so many events of this cycle, it all started with.

with the presidential tweet. On Friday morning, Trump announced on Truth Social that the U.S. would impose an additional 100% tariff on China in retaliation for export controls on rare earth metals. Markets sold off all day with the S&P 500 falling by 2.7% and the NASDAQ dropping 3.5%. Last Friday was the worst day for stocks since the original tariff announcements in April. Bitcoin also dove collapsing by more than 7% on the day. Importantly, the collapse in crypto took place over two distinct phases. There was a relatively well-controlled drawdown across the daytime trading session in New York. Then, as the stock market closed, the crypto ecosystem saw a violent flash crash. Bitcoin lost 5.5% in the space of an hour, while

Alt coins were an absolute bloodbath. Kobe wrote, probably one of the most severe flushes I've ever seen on Alt. I didn't even imagine Alt's had this much leverage in them. It feels like somebody got hit very hard and we will see a large body float to the surface soon. Reminds me a little of summer 2021. Recktmando tweeted, I haven't seen a move like that since I've been trading crypto. Coins don't go down 80 to 90% in a wick, have to assume a marketmaker or liquid fund blew up. Several coins in the top 100 had wicks down to very close to zero, meaning this very clearly wasn't an announcement-driven sell-off or a typical leverage unwind. Bitcoin Jack commented, everyone who still thinks this was caused by the news should probably quit now.

Overnight on Sunday, the data started to come in, and it was incredibly ugly. Over 9% of overall crypto market cap was wiped out on Friday. Bitcoin traded to 102,000, barely clinging on to the crucial six-figure level. But the most startling statistic was 9.5 billion in leveraged positions liquidated. This was likely the largest liquidation event in dollar terms in crypto history. And there's some indication the damage was much larger. Most of the exchanges had their data feeds go down or get throttled during the event. However, Coinglass suggested as much as 400 billion in leverage positions could have been liquidated. Others put the figure it closer to 30 to 40 billion. Whatever the range actually was, this was a devastating event for anyone with a leverage position open.

Majors were relatively okay, but for coins that wicked zero, the entire book was wiped clean. Now, with this scale of damage, it is worth reinforcing that 10 billion or 40 billion in liquidations doesn't actually mean that people lost that much money. The total size of the position is quoted in liquidation statistics, so for someone on 20x leverage, they would have only lost one 20th in liquidated collateral. That said, it was still, of course, an incredibly painful event, especially in all coins. On-chain check, made he commented, Folks, the level of destructions in all coin land is FTX grade.

Coins have been shown to be no bid when the market makers switch off, no serious investor can own them, and it just nuked the few retail traders remaining. If you think alt season is coming now, I'd suggest a rethink. Now, many also noted that unlike previous market events like the COVID crash, Bitcoin didn't seem to suffer all that much. While admittedly being down 7% in a day is no fun, the COVID crash saw a 40% death candle. Bitcoin Jack noted, the biggest difference is that Bitcoin is no longer the main collateral in the cross-collateralization complex we have today. Back in March 2020, when open interest evaporated, BitMex was the place with all the DGens and it was mostly collateralized with BTC, all the cascades translated to increase

Bitcoin volatility and vice versa. That and the fact that Bitcoin sits far closer to its fair value and institutionalization created deep liquidity, which obviously isn't the case for Harry Potter Obama Sonic Inu. Now, while I don't want to make this a focus of the show, there has been a lot of speculation around one trader on hyperliquid who managed to time the market suspiciously well. They profited $150 million by putting on a short position minutes before the Trump tweet. Later in the weekend, on-chain analysts' eye-on-chains identified them as Garrett Jin, the founder of CryptoExchange BitFerX, which collapsed after a fraud investigation. CZ amplified the tweet seeking answers from the CT hive mind.

Jin later claimed to have no connection to the Trump family or access to insider information. Also in conspiracy corner, Trump-aligned World Liberty Financial collapsed in price well ahead of every other token, leading many to suspect front-running. And while these allegations of insider trading are important and will color how the crash is viewed, they are ultimately, at least for this moment, a bit of a subplot that we do not have time or information to fully unpack right now. Now, as the dust began to settle across the weekend, it became clear that this was no ordinary crash.

While this has been a relatively mild cycle compared to previous ones, we've still had a ton of crashes in market events and none of them looked anything remotely close to this one. When the crash was taking place, it looked like the markets had been shut off. Most people only had two frames of reference. March of 2020, when Bitmax famously shut off the exchange to stop Bitcoin going to zero, and the death throws of FTX when withdrawals were closed and all of the charts dislocated completely. Alcoin Psycho commented, COVID and FTX reasonably shook the markets, but this was so exaggerated that it's clear one of Crypto's main players got fully cleaned out today and triggered that bigger cascade. By far the weirdest crash I've seen in crypto,

expecting some big news soon. By the end of the weekend, we had a few more answer, An analyst called YQ published a note about market-making activity on Friday afternoon. They showed a chart of an unnamed major alt on Binance with market depth going from 1.2 million to close to zero in the space of half an hour. Liquidity remained near zero for an hour and was stunned it throughout the night. It looks like either all of the market makers on Binance pulled their liquidity for some group of altcoins or there was an issue on the exchange. Legacy internet and infrastructure are brittle, plagued by downtime, coverage gaps,

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This is fintech for infrastructure, connecting capital directly to business. builders and returning revenue seamlessly to funders. No middlemen, no bottlenecks, just sovereign, resilient infrastructure that works for people, communities, and investors alike. Learn more at Althea.net and find them on Crackin to join the future of infrastructure finance. Another part of the puzzle was a DPEG for Athena's tokenized basis trade USDE. The token is supposed to trade at a dollar but briefly hit 65 cents on Binance. The token also came off its peg on bybit, but only down to 95 cents. This was a venue-specific depegs, with seemingly parts of Binance's infrastructure breaking and preventing marketmakers from arbitraging the event. Now, crucially, Binance accepts USDE as collateral for

perps trading, so everyone who uses it saw their collateral erode at the same time as their positions, pushing more liquidations through the system. Binance's Oracle uses their own order book to price collateral rather than the dominant market or the average of multiple platforms. Earlier this month, Binance announced plans to move away from this system later in October. Haseeb Qureshi of Dragonfly commented, Good liquidation mechanisms don't trigger on flash crashes. A trader called Elon Trades went a little further and suggested this was an actual attack on the exchange.

This was the last weekend the Oracle exploit would be available with the fixed scheduled to occur on Tuesday. Elon Trades claimed that between 60 and 90 million worth of USDA was dumped on Binance to force a DPEG and kick off this liquidation cascade. A low liquidity Friday night heading into a long weekend in the U.S. would be the time to do it, with Trump's headline bomb just adding to the pay.

potential. Notably, no one is claiming that Athena did anything wrong, and they honored redemptions at a dollar throughout the event. Now, at this point, we don't have any real evidence to substantiate the theory, but it has a ring to truth to it, so let's call it reasonable speculation and move on. Binance did acknowledge some amount of fault and announced on Sunday that they'd already paid out $283 million in compensation to traders affected by the DPEG, but not those who lost money from overall market conditions. Now that the weekend is over, the event seems to be passing quickly. On Sunday, Trump walked it all back, tweeting, don't worry about China, it will all be fine. All coin staged a huge rally that evening, putting in one of their biggest days in recent memory.

Bitcoin has stabilized somewhat, reaching $15,000 on Sunday, but heading into another drawdown on Monday. It was trading at around $110,000 on Tuesday morning, but looking decidedly weak. So, what are the big takeaways? The loudest take was from those screaming for people to stop using leverage. The event hit everyone, but a huge portion of leverage traders got wiped out. At this point, the danger of leverage seems pretty well understood, so there's not all that much to add there. But another corner of the commentary was remarking on how well various things in the crypto ecosystem held up. Both Ave and Hyperliquid processed a ton of liquidations without skipping a beat. It wasn't always true that you could take defy infrastructure for granted, but we haven't

seen a major problem during a systemic event in many years. Several Bitcoiners were calling the price action resilient, but that seemed far more true on Sunday than it does today. Kiyang Zhu, the CEO of Crypto Quant, noted that unrealized profit for new whales have just gone underwater. He said this doesn't tell us if it's bullish or bearish, but one thing's clear, volatility is coming. Other people's minds immediately went to the regulatory implications. While the stock market dumped, this was a big prominent flash crash in crypto. Similar events have occurred in the stock market before, such as the 1987 crash. That was also a technical issue that ended up breaking liquidity and led to root and branch infrastructure and regulatory reforms.

On Sunday, Bloomberg ran an article entitled, Crypto's biggest crash reveals a market littered with pitfalls. Justin DeAnathan had partnerships at Arctic Digital told Bloomberg that the market dynamics of auto-de-leveraging rather than margin calls, quote, poured gasoline on the fire and felt less like a market and more like a trap snapping shut. If the anti-crypto army has any power left, this is exactly the kind of event that would give them a boost in calling for major reforms. Another big piece of the commentary was discussion of what this should mean for market structure. There were plenty of calls to bring max leverage down below 20x. But while some exchanges do offer insane leverage that almost always ends badly, this event really wasn't about.

about 20x leveraged traders blowing up. Their liquidations might have made things slightly worse, but they're a tiny portion of the market, and they also weren't the trigger for the event. A more novel critique along these lines is that there is a growing problem with exchanges taking advantage of users, especially in the rising on-chain perp space. Jordi Alexander, the founder of market maker Selene Capital, tweeted, exchanges that have tokens should start prioritizing their users instead of their token holders, or they will quickly be left with neither. We have a long way to go on the road from casino to serious financial infrastructure, and instead of posting how much this fault or that one made from its users,

I suggest thinking about how to address the obvious fundamental issues with the market structure. The other obvious conversation was about what this meant for the cycle, but Jeff Dorman, the CIO of ARCA, does not think this was the sort of event that ends bull markets, commenting. This was largely a technical or mechanical flash crash and not a fundamental crash, typically much faster recoveries from technical crashes. Now, at this stage, we haven't heard any rumors of bankrupt market makers or any meaningful contagion. this was certainly not a repeat of the Luna crash, and it doesn't seem like there's much collateral damage in the ecosystem beyond the leverage traders who took major losses. Raoul Paul of Real Vision tweeted,

All said and done, regardless of what sparked it, Friday was a flash crash. Flash crashes usually recover in V-shapes back to their prior price and range, and usually go on to make new high shortly after. In this case, we entirely wiped out all accumulated leverage too. Hire. Trader Alex Kruger agreed, posting, All-time highs coming again this year. Thank you for your attention to the matter. Wild times out there as always in crypto, showing we still got a little spunk left even in this Tradfai era. For now, that's going to do it for today's breakdown. Appreciate you listening as always, and until next time, be safe and take care of each other.

Peace.