Exchanges: Binance, OKX, and Bybit saw the largest liquidations, primarily involving long positions, indicating higher leverage trading activity on these platforms.
The dramatic wave of liquidations was further amplified by thin market liquidity, a fact clearly observed in Binance's BTC/USDT order book depth data. The chart below compares the order book depth of BTC/USDT within ±2% of the mid-price during the crash week (October 6-13) with the year-to-date (YTD) period. Data Source: Coin Metrics Market Data Pro. Under normal market conditions (dashed line), BTC order book depth remains relatively stable, with both buy and sell liquidity remaining around $40 million. During the crash (solid line), liquidity on both sides of the order book dries up significantly. When liquidity is insufficient, even moderate selling pressure can trigger far greater-than-expected price volatility, accelerating the downward trend. For Bitcoin, this liquidity squeeze, while severe, remains manageable. For altcoins, already thin order book depth has almost completely evaporated, leading to even greater price fluctuations and wider bid-ask spreads. Fourth, a special case: Ethena's USDe price dislocation. One of the most notable casualties of this crash was USDe, the synthetic USD stablecoin issued by Ethena. Unlike fiat-collateralized stablecoins like USDT and USDC, USDe maintains its peg through delta-neutral basis trading—that is, holding a long spot position while simultaneously establishing an equal short position in a perpetual swap. USDe is primarily used as margin collateral on centralized exchanges like Binance (Binance previously promoted USDe through a high-yield incentive program). Its staking counterpart, sUSDe, is widely used as collateral in lending protocols. This unique risk structure, coupled with its cross-chain and off-chain use cases, makes USDe's stability highly tied to the overall leverage environment. During the crash, USDe's price plummeted to $0.67, while fiat-collateralized stablecoins like USDT and USDC traded slightly above $1 parity. The platform with the most severe price misalignment is Binance, where USDe leverage exposure and trading activity are likely the highest. In contrast, the USDe price on Bybit is closer to parity (around $0.94), and on decentralized exchanges like Curve, the price is even maintained around $0.99, suggesting deeper USDe liquidity or lower leverage exposure on these platforms. Although USDe prices subsequently recovered rapidly, this incident highlights the importance of comprehensively assessing secondary market liquidity and the impact of cross-platform pricing fragmentation.
Data source: Coin Metrics market data feed
This incident did not fundamentally threaten Ethena's design logic—USDe remained overcollateralized, and minting and redemption functions continued to operate normally. However, it exposed the risks behind platform-specific oracle pricing and leverage zeroing. V. Key Points for the Future This weekend's crash reminds us that when leverage, insufficient liquidity, and macroeconomic shocks converge, market fragility can quickly become apparent. While this incident exposed some structural flaws, it did not alter the fundamental basis for the market's long-term development. 1. Leverage and Liquidity The accumulation of leverage in the perpetual futures market, coupled with thin liquidity, created conditions for rapid deleveraging. Following price declines, liquidations and a liquidity crunch formed a mutually reinforcing cycle, becoming the core driver of volatility. 2. The Reflexive Nature of 24/7 Trading Cryptocurrency's 24/7 trading allows market shocks to be transmitted in real time. The lack of traditional market circuit breakers further amplifies volatility, especially on weekends when liquidity is already thin. 3. Platform Fragmentation: Differences in liquidity and pricing across exchanges exacerbate price disparities. This suggests the market urgently needs improved cross-platform liquidity aggregation, cross-platform risk management, and more reliable pricing infrastructure. 4. Synthetic Asset Risk: USDe's price disparity demonstrates the potential for risk transmission between on-chain and off-chain markets when synthetic and tokenized assets become more correlated with traditional markets. 5. Network Resilience: Despite record volatility, the on-chain network has remained resilient: block generation, throughput, and transaction fees have remained stable even as demand for block space has surged. 6. Structural Maturity Despite significant price dislocations among most altcoins, Bitcoin and other mainstream assets have performed relatively resiliently. This reflects both the improved resilience of the market structure and the positive impact of institutional participation. This large-scale deleveraging was essentially a stress test, not a systemic failure. While it caused short-term disruptions, it helped the market eliminate excess leverage and laid a healthier foundation for subsequent development.
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