The cryptocurrency market experienced a dramatic crash on October 10th, with altcoins suffering some of the most severe losses in history. Unlike Bitcoin and Ethereum, which saw relatively small drops, smaller crypto tokens experienced steep declines. This selloff was triggered by a shock wave sent through global markets after US President Trump announced new tariffs on China.
According to CoinGlass data, over 1.6 million investors lost $19.37 billion in leveraged positions within 24 hours – the largest historical liquidation event in crypto history. While Bitcoin and Ethereum have since recovered some ground, many altcoins continue to face significant damage.
Crypto analysts highlighted a key difference between large-cap crypto assets like Bitcoin and Ethereum, and smaller altcoins: their structure and susceptibility to market fluctuations.
Frank Chaparro, of GSR, explained: “These larger assets have greater institutional support via ETFs. Smaller coins are more volatile and illiquid.”
Wintermute data confirms this trend; mid- and small-cap tokens lost between 60% and 80% of their value during the crash, while Bitcoin fell by only 11% and Ethereum by 13%. This highlights a stark disparity in market resilience.
Chaparro termed the recent price drop a “doom loop” where price drops trigger liquidations, which further push prices down, exacerbating the situation. The lack of circuit breakers like those found in traditional stock markets adds to the fragility of the crypto ecosystem and accelerates chain liquidations during downturns.
The surge in leveraged trading also exposed the vulnerability of the crypto market. “Spot Bitcoin and ETH ETFs, approved last year, provided investors with 2x or 3x leverage, further amplifying risk.” warns Grayscale Research Director Zach Pandl.
While the market remains volatile, analysts offer varying perspectives on future outlook. While Chaparro emphasizes a continued reliance on traditional exchanges, crypto researcher Molly White suggests this crash could be a precursor for similar events in the future. “This crash highlighted how quickly investors panic when pricing is expected to perpetually rise,” she writes.
Juan Leon, Bitwise investment strategist, believes the increasing presence of institutional investors may lead to reduced volatility over time. “Large-cap institutions are entering the market with a long-term perspective and not trading at 50x leverage” he points out.
This article is for informational purposes only and should not be construed as financial advice.