Newsletter: Anatomy of a crypto meltdown
October 2025 brought the most dramatic crypto flash crash of all time, but it was only a dress rehearsal for the systemic crisis the industry is building toward.
https://www.citationneeded.news/anatomy-of-a-crypto-meltdown/
Crypto’s October 10 flash crash, following a Trump social media post threatening severe tariffs on China, caused $19 billion in liquidations. It’s a signal that the market most eager to be taken seriously may also be the one least equipped to handle real-world shocks.
It all started when Trump’s threat to further increase tariffs on China by 100% caused traders to panic sell crypto, with some fleeing for safer assets like Treasury bills and gold.
Bitcoin plummeted 10% in the span of minutes, and other tokens were even harder hit. Altcoins like Solana plunged 40%, and Trump’s own memecoin dipped more than 60%.
Volatility only increased as market makers withdrew. Some accused these institutions abandoning their responsibility during a critical time, while others reasoned that they have no regulatory or other mandate to stabilize markets — potentially at their own expense.
As trading activity spiked, exchanges went down or suffered outages that prevented people from placing trades or shoring up their positions. Binance, Coinbase, Kraken, Robinhood, and several other major platforms were all reported to experience significant service interruptions.
But the biggest factor in the meltdown was leverage. As prices dropped, leveraged positions were forcibly liquidated. This contributed to sell pressure, causing prices to go lower, triggering more liquidations. A classic crypto “death spiral”.
Cascading liquidations were worsened by crypto exchange glitches which left some customers watching helplessly as stop-losses failed to trigger or trades to add more collateral to at-risk positions failed to execute.
Though leverage is not unique to crypto, some things are: the extremely high leverage offered by some platforms (100x or more), the ability to use highly volatile cryptoassets as collateral, the speed at which positions can unwind, and limited requirements for position monitoring or risk management.
Molly White
David Pollak
⚯ Michel de Cryptadamus ⚯