Bitcoin’s October 10, 2025 crash: $40 billion in liquidations and the role of major players

For years, the crypto industry saw itself as an alternative to the traditional financial system and took pride in operating by its own rules. But on October 10, 2025, that era effectively came to an end.

In just a few hours, the market experienced a massive sell-off that wiped out billions of dollars and revealed that the crypto market is no longer an isolated ecosystem. GetBlock AML Research reconstructed the events in detail to understand what triggered the collapse.

Bitcoin’s October 10 Crash and Market Liquidations

On that day, Bitcoin fell from around $126,000 to $104,782. The official explanation blamed panic across global markets after the announcement of 100% tariffs on Chinese goods.

However, blockchain data suggests this may have been only the final trigger, while the conditions for the crash had been forming much earlier.

According to official figures from crypto exchanges, total liquidations—forced closures of traders’ positions—reached about $19.3 billion. But the real losses may have exceeded $40 billion.

Blockchain researcher MLM and infrastructure specialists across the crypto industry, including Hyperliquid CEO Jeff Yan, argue that the official numbers may significantly underestimate the scale of the event. Many centralized exchanges limit the speed of data updates during extreme volatility, which can obscure what’s actually happening in real time.

For the 1.63 million retail traders whose accounts were liquidated, the event was far more than a routine correction—it was effectively a massive redistribution of capital.

While retail investors were following news headlines and optimistic forecasts from industry leaders, the underlying mechanics of the market were quietly shifting.

Some analysts believe the events of October 10 marked a turning point: a market once designed for independent investors is gradually evolving into a system dominated by major financial institutions.

The Setup: The Strange “10 AM Dump”

In the months leading up to the crash, traders noticed an unusual pattern.

Almost every day at 10:00 UTC, when U.S. markets opened, Bitcoin’s price would suddenly drop.

Traders even gave the phenomenon a nickname: the “10 AM Dump.”

Some analysts believe this may have been linked to the activities of Jane Street, a major trading firm that acts as a market participant for BlackRock’s Bitcoin ETF.

The suspected strategy worked like this:

• large sell orders appeared at moments of peak demand
• the price briefly dropped
• institutional investors could buy Bitcoin at a lower price

Retail traders who were expecting upward momentum often lost money during these sudden short-term dips.

During court proceedings involving Terraform Labs in 2026, testimony suggested that Jane Street may have previously used similar algorithmic strategies during the Terra/Luna market events in 2022.

After those details became public, the daily 10:00 UTC price drops largely disappeared. Within 48 hours of the court documents being released, Bitcoin rose about 10%, which some experts interpret as a sign that the market may have previously been under artificial downward pressure.

A $1.1 Billion Short Position Before the Crash

Another key episode involved a massive trade on the decentralized exchange Hyperliquid.

According to on-chain data, several hours before the tariff news became public, a huge $1.1 billion short position betting against Bitcoin began forming.

The position started building at 14:27 UTC and was fully completed at 20:49 UTC—just one minute before a post appeared on the social platform Truth Social, after which the market collapse began.

Wallet addresses involved in the trade were linked to Garrett Jin, a former executive at the crypto exchange BitForex.

Jin later said his company only provided technical services for third-party clients. Still, the timing of the trades raised serious questions among analysts. According to on-chain estimates, the profits from the operation may have exceeded $150 million.

How Morgan Stanley’s Announcement Boosted Crypto Demand

On the morning of the crash, Morgan Stanley sent an internal message to its financial advisors.

The memo stated that starting October 15, cryptocurrency investments would be available to all bank clients, not just wealthy investors.

The announcement sparked optimism among retail traders. Many rushed to buy crypto, expecting a wave of new money to enter the market.

Ironically, that surge in buying may have provided liquidity for large players who were already preparing to sell.

The Role of MSCI and Stock Market Indices

That same day, MSCI, the firm behind some of the world’s most influential stock indices, released a proposal to change the classification rules for companies holding large amounts of cryptocurrency.

Under the proposal, if more than 50% of a company’s assets consist of crypto, it could be reclassified as an investment fund.

This would potentially lead to such companies being removed from major indices. Since many investment funds must track these indices, they would be forced to automatically sell those stocks.

According to JPMorgan, the changes could have triggered:

• about $2.8 billion in sales of MicroStrategy stock
• nearly $9 billion in total market sell-offs

Liquidations and Binance System Failures

During the market crash, serious issues also emerged on Binance, the world’s largest crypto exchange.

Analysts discovered that some assets inside the exchange’s internal system temporarily dropped close to zero in value, even though their prices remained stable on other platforms. This happened due to the way Binance calculated collateral values.

As a result:

• thousands of traders lost funds
• their positions were automatically liquidated
• even though their assets still had significant value at global market prices

Binance later paid about $328 million in compensation to affected users.

Why Crypto Markets Amplify Liquidations

The events of October 10 exposed another structural problem.

Traditional stock markets use mechanisms called circuit breakers. If prices fall too quickly, trading is temporarily halted.

Most crypto exchanges do not have these protections.

This allows liquidation systems to trigger a chain reaction:

• prices fall
• trader positions are liquidated
• the system sells their assets
• prices fall even further

Real Losses: Up to $40 Billion in Liquidations

Official data reports about $19 billion in liquidations. But on-chain analysis suggests the real number may be closer to $40 billion.

One reason for the discrepancy is how exchanges publish liquidation data. Some systems report only one liquidation per second, even if thousands occur during that time.

How the Crypto Market Changed After the Crash

By early 2026, the S&P 500 had fully recovered from the crisis.

Bitcoin had not.

Interest in speculative trading dropped sharply:

• total open interest in the market fell
• from $146 billion to about $20 billion

Institutional investors quickly moved into the gap, bringing a different strategy known as basis trading.

This approach profits from price differences between markets, rather than betting on price increases.

As a result, Bitcoin is gradually shifting from a high-risk trading asset into a financial instrument used by large funds.

The U.S. Government’s Response

Another unusual aspect of the crash was the near absence of comments from the U.S. government.

Despite earlier statements supporting crypto innovation, the White House offered no official assessment of the largest market collapse in the industry’s history.

The Pardon of Changpeng Zhao

Thirteen days after the crash, while many investors were still calculating their losses, U.S. President Donald Trump signed a pardon for Binance founder Changpeng Zhao (CZ).

The move came at a time when the exchange was facing intense scrutiny over its role in the October 10 events.

Later reports revealed that Binance controlled about 87% of the supply of the stablecoin $USD1, linked to a project associated with the Trump family.

Why did Trump pardon the former head of Binance? There is a simple explanation

The American leader may have pardoned Changpeng Zhao after receiving financial benefits from deals with the former Binance CEO’s entities

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$40 Billion in Liquidations: A Massive Redistribution of Capital

According to analysts, the roughly $40 billion lost by retail traders didn’t simply disappear.

Instead, much of that capital likely moved into the hands of larger market participants who had prepared for the event in advance.

For many observers, the crash symbolized a fundamental shift in the industry. The crypto market—once created as a decentralized alternative to traditional finance—is increasingly becoming part of the same financial system it aimed to replace.