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🐳 Daily Edition: Crypto Recovers After Largest Liquidation in History

🐳 Daily Edition: Crypto Recovers After Largest Liquidation in History

Friday was scary, but could it end up being bullish?

Beluga & Will McKinnon
October 13, 2025

The dust has started to settle after Friday’s flash crash with Bitcoin retracing about half of the move so far, but there are still lots of theories floating around on who or what caused this. One of the main ones seemingly being pushed by CZ and Binance were that the depeg of Ethena’s stablecoin on Binance sent other coins into a spiral — given USDE depegged after the initial dump, it doesn’t seem likely that is the answer. What is far more likely is that the tariff announcement was made at the most illiquid time for crypto markets, sending huge sell orders into thin order books while traders had taken on significant leveraged positions. The resulting cascade took out almost half of all open interest across perpetuals exchanges. The market is typically balanced between longs and shorts, so to see a drop in total open interest of this significance means the vast majority of longs were liquidated (oversimplification as this counts closed positions as well, but the point stands).

24 Hour Heatmap, Source: CoinMarketCap

If you think about crypto pricing from the perspective of sellers vs. buyers, for the price to go up you obviously need more people to be buying than selling. People in significant profit tend to be the biggest sellers, many of whom were liquidated during Friday’s cascade despite their low entries. Those entering now have will have a much higher cost basis, changing the holder demographics significantly and (in theory) improving the ratio of sellers to buyers. We’re certainly not out of the woods yet as there remain concerns over the US Government shutdown and a seemingly-never ending list of global conflicts, but this may in the end turn out to be a healthy and important event for the crypto market.