The cryptocurrency market reeled from a historic $20 billion liquidation event in late October 2025, triggered by former U.S. President Donald Trump's announcement of 100% tariffs on Chinese imports and export controls on critical software.
(BTC) and (ETH) plummeted, with dropping below $102,000 and falling to $3,700, while altcoins like (SOL) and suffered double-digit declines. The collapse exposed systemic vulnerabilities in leveraged trading and exchange infrastructure, with Binance at the epicenter of the crisis.
The liquidation wave began as Trump's tariff threat sent shockwaves through global markets, with crypto traders bearing the brunt. Over 1.6 million positions were wiped out within 24 hours, according to Coinglass data , as leveraged longs and shorts collapsed. Binance's wrapped tokens-USDe,
, and BNSOL-experienced catastrophic depegs, with briefly trading at $0.65 and wBETH hitting $430.65. The exchange's unified margin system, which marked collateral using internal order-book data instead of external oracles, exacerbated the crisis by triggering cascading liquidations .Binance faced intense backlash for technical outages and frozen accounts during the crash, with users accusing the exchange of profiting from the turmoil. Co-founder Yi He admitted to "platform-related issues" and announced compensation for affected traders, though only losses directly tied to Binance's failures would qualify . Meanwhile, analysts debated whether the crash was an inevitable deleveraging or a coordinated exploit. Dragonfly's Haseeb Qureshi argued that traders exploited Binance's pricing flaw by dumping $60–90 million in USDe, wBETH, and
to trigger the collapse .Despite the carnage, the market began a measured rebound. Ethereum led the recovery, surging to $4,150 as leveraged positions unwound and DeFi activity resumed. Bitcoin stabilized near $115,000, while gold hit a record $4,059.87 per ounce as U.S.-China tensions fueled demand for safe-haven assets. Bitwise's Jonathan Man noted that the liquidation "cleared the decks for a faster reset," with staking mechanics in Ethereum slowing panic selling by keeping 30% of the supply locked in validators .
Binance's post-crisis measures included shifting to oracle-based pricing for wrapped assets and introducing minimum price thresholds for USDe. The exchange also pledged to review risk controls more frequently. However, critics argued that systemic risks remain, particularly in leveraged trading and centralized collateral systems. "This was a masterclass in exploiting an exchange's weakest structural link," one analyst remarked, highlighting the need for regulatory scrutiny .
The incident underscored crypto's growing entanglement with macroeconomic and geopolitical forces. While some view the crash as a necessary purge of excess leverage, others warn of deeper fragility. As Trump's tariff deadline looms, markets remain on edge, with Bitcoin's ability to reclaim $120,000 seen as a key barometer for broader recovery. For now, traders are shifting to spot positions and reducing leverage, signaling a cautious approach in the wake of the worst liquidation event in crypto history .
Source: [1] Asia Morning Briefing: Ethereum Leads Recovery After $20B (https://www.coindesk.com/markets/2025/10/13/asia-morning-briefing-ethereum-leads-recovery-after-usd20b-liquidation-shock)
[2] Crypto Community Recovers From Shock of $20 Billion Liquidation (https://cryptonewsland.com/crypto-community-recovers-from-shock-of-20-billion/)
[3]
Surges as Crypto Markets Reset After $20B Liquidation Shock (https://elevenews.com/2025/10/12/bnb-defies-crypto-turbulence-a-fintech-perspective-on-post-liquidation-market-rotation/)[4] Trump's 100% China Tariff Sparks $20B Market (https://www.btcc.com/en-US/square/Cryptonews/1058052)
[5] Binance to Compensate Users Affected by Crash in wBETH (https://www.coindesk.com/markets/2025/10/12/binance-to-compensate-users-affected-by-crash-in-wbeth-bnsol-and-ethena-s-usde)
[6] Did hackers use Binance collateral loophole to crash crypto (https://www.cryptopolitan.com/hackers-used-binance-to-crash-crypto-market/)
[7] Did Trump's Tariff Trigger A Crypto Purge Or Just A Panic? (https://www.forbes.com/sites/digital-assets/2025/10/11/did-trumps-tariff-trigger-a-crypto-purge-or-just-a-panic/)
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