On October 10, the cryptocurrency market experienced an unprecedented $19 billion liquidity wipeout, marking the largest single-day liquidation by dollar value in history. Initially viewed as a typical series of forced position closures across major exchanges, the event soon spiraled into a complex scenario that left many traders frustrated and questioning the underlying stability of the crypto ecosystem. The focal point of this turmoil? Binance, the world’s largest cryptocurrency exchange.
During this incident, Bitcoin, the leading cryptocurrency, plummeted by as much as 12.5%, its steepest decline in 14 months. This drastic fall compelled exchanges to close or liquidate leveraged positions that lacked adequate funds. Given Binance’s dominant position in the market, the exchange became synonymous with the downturn, prompting widespread speculation and accusations on social media regarding its role in the event.
Despite facing mounting scrutiny, Binance has consistently maintained that it bore no responsibility for the closures on that fateful day. In the aftermath, liquidity levels across the broader market have remained precariously thin. Order books are yet to be fully repaired, and market depth has shown signs of deterioration, making it increasingly challenging for traders to navigate the landscape. The widened spread between buyers’ and sellers’ pricing further exacerbates the situation, contributing to a general erosion of trust among market participants.
Cathie Wood, CEO of Ark Invest, has weighed in on the discourse, attributing the instability directly to a perceived “software glitch” at Binance that, she claims, led to $28 billion in deleveraging. In response, Binance co-founder He Yi pointed out that the exchange does not cater to U.S. individuals, a statement later deleted amid the rising tensions. Competitors took this opportunity to capitalize on Binance’s struggles, with Star Xu, founder of rival exchange OXK, suggesting that the events of October 10 inflicted “real and lasting damage to the industry.” Such remarks were widely interpreted as veiled criticisms aimed at Binance.
Amidst these tensions, Binance has reiterated that the chaos of October 10 was not the result of an internal malfunction. During an AMAA session, co-founder and former CEO Changpeng “CZ” Zhao dismissed the accusations as “far-fetched,” attributing the upheaval to “market factors” including macroeconomic pressures, high leverage levels, and liquidity issues compounded by congestion on the Ethereum network. Binance also reported compensating affected users to the tune of approximately $283 million.
Despite these efforts, many stakeholders continue to express dissatisfaction. The $19 billion liquidation figure has grown emblematic of deeper issues within the crypto market structure. One trader, known as Bitcoin Realist, vented frustrations on social media, underscoring the perception that Binance’s compensation amounted to little more than a fraction of the damage inflicted upon traders.
The incident not only ignited discussions about Binance’s role in the market but also highlighted the fragility of the crypto ecosystem in high-leverage conditions. While some argue that the nature of the markets demands a scapegoat, others, including Evgeny Gaevoy, CEO of market maker Wintermute, contend that the crash was more a product of the market’s structural problems than of any single exchange’s actions.
The absence of a formal inquiry into the events of October 10 further complicates the narrative. Former CFTC regulator Salman Banaei has called for transparency, likening the situation to the infamous stock market flash crash of 2010, asserting the need for thorough investigations to deter any future manipulative behavior.
In the wake of this collapse, confidence within the cryptocurrency space has been shaken. Many traders are left grappling with the implications of widespread liquidations in a market that remains heavily reliant on leverage and conditional liquidity. The significant losses and lingering questions raised by October 10 suggest that the crypto industry must confront its structural vulnerabilities more critically to restore trust and stability among its participants.
