On October 10, nearly $20 billion in leveraged crypto positions were wiped out in the largest dollar-value liquidation on record. Was it caused by misunderstood Chinese policy, whale games, or simply the structural fragility of crypto itself?



When Bitcoin plunged below $110,000 on October 10 and altcoins followed, the fallout was brutal: nearly $20 billion in leveraged positions were liquidated in less than 24 hours. It was the largest liquidation event by dollar value in crypto’s history, sparking a familiar debate. Was this a story of miscommunication and misunderstanding, market manipulation by whales, or just another case of crypto being crypto?


Miscommunication: China’s Rare Earth Shock

The event came just as China announced expanded rare earth export controls, restricting not only raw minerals but also certain processing technologies critical to semiconductors, defense, and renewable energy. Officials stressed that this was not a full export ban and that many civilian uses would remain licensed. But in the fog of fast headlines, nuance was lost. Traders interpreted the move as a dramatic chokehold on global supply chains, fueling a risk-off reaction that bled into crypto markets.


Manipulation: Exploiting Panic

For many observers, the timing was too perfect. Crypto derivatives markets are transparent — whales can see where liquidation clusters sit and, in thin liquidity, it doesn’t take much to push the market into those zones. With rare earth headlines dominating the narrative, opportunistic players may have shorted aggressively, triggered forced selling, and then covered at lower levels. Whether provable or not, the pattern of “liquidation hunting” under cover of macro news is a familiar one in this space.


Over-Leverage and Thin Liquidity: The Dry Tinder

Even without miscommunication or manipulation, crypto was already fragile. Leading into October, open interest in Bitcoin futures had climbed sharply, and funding rates revealed crowded long positions. Add thin liquidity during the Asian session, and the market was primed for a cascade. Once BTC slipped into liquidation zones, forced sells and margin calls amplified the move across the entire market.


The Convergence

In reality, the October 10 wipeout was the convergence of all three factors:

  • Miscommunication over China’s policy spurred panic.

  • Whales likely weaponized the headlines to hunt leveraged positions.

  • Over-leverage and structural fragility guaranteed that once the dominoes fell, they fell hard.


    Lessons Learned

    The takeaway is less about choosing which factor “caused” the crash and more about understanding how macro shocks, manipulation, and crypto’s design flaws intersect. Until leverage is better managed, liquidity deepens, and communication improves at the policy level, events like this will continue to punctuate crypto’s story. The October 10 liquidation event wasn’t just “crypto being crypto.” It was a perfect storm where miscommunication, manipulation, and structural fragility collided — and it’s a reminder that in this market, volatility is not the exception but the rule.