The cryptocurrency market endured one of its most volatile episodes in late October 2025, as a $20 billion liquidation event triggered by U.S.-China trade tensions and a Binance pricing flaw sent shockwaves through digital assets.
(ETH) and (BTC) led a sharp rebound after the turmoil, while gold surged to record highs as investors sought safety amid geopolitical uncertainty.
The crisis began when former U.S. President Donald Trump announced a 100% tariff on Chinese imports, reigniting trade war fears and triggering a sell-off in risk assets. Bitcoin plummeted nearly 9% in a single day, while Ethereum dropped 17%, according to CoinDesk. The collapse exposed vulnerabilities in leveraged positions, particularly on long-tail tokens, as liquidity vanished and forced liquidations cascaded across exchanges. Jonathan Man, portfolio manager at Bitwise, noted that excessive leverage in long-tail tokens exacerbated the crisis, but the selloff also "cleared the decks for a faster reset".
Binance faced intense scrutiny for its role in the chaos. A pricing flaw in its Unified Account system allowed traders to exploit collateral valuation using Binance's internal order-book data instead of external oracles. This led to a localized depeg of Ethena's
stablecoin to $0.65 on Binance, while it remained near $1 on other platforms. The mismatch caused massive margin losses, wiping out hundreds of millions in value and triggering forced liquidations. Yi He, Binance's co-founder, admitted to "platform-related issues" and pledged compensation for affected users, though the exchange reiterated it would not cover ordinary market losses.The fallout extended beyond crypto. Gold hit a record $4,059.87 per ounce as trade tensions fueled demand for safe-haven assets. Traditional markets also suffered, with the S&P 500 dropping over 2% as investors fled risk. Analysts highlighted the interconnectedness of crypto and traditional finance, noting that Bitcoin's behavior during the crisis resembled a risk asset rather than "digital gold".
Post-crash analysis revealed structural weaknesses in crypto's leverage-heavy ecosystem. Over $600 million in leveraged positions were liquidated within 24 hours, with Ethereum leading the carnage as $235 million in
longs were wiped out. Hyperliquid, a decentralized exchange, reported a $21 million hack during the turmoil, further spooking traders. Despite the carnage, some market participants profited: one trader reportedly earned $190 million by shorting Bitcoin and Ethereum ahead of the crash.The recovery began as liquidity returned and traders unwound shorts. Ethereum rebounded to $4,150, while Bitcoin stabilized around $115,000. Staking mechanisms on Ethereum, which locked nearly 30% of the supply, provided a buffer by slowing panic selling. Binance moved swiftly to address the flaw, switching to oracle-based collateral pricing and compensating affected users.
Looking ahead, volatility is expected to persist. The Federal Reserve's October policy meeting and potential rate cuts could influence crypto markets, while ongoing trade tensions remain a wildcard. Despite the turmoil, institutional interest in crypto-evidenced by record inflows into spot ETFs-suggests long-term optimism. "This episode is a healthy deleveraging," said one analyst, noting that crypto's resilience could pave the way for renewed growth.
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