The biggest winners in the market crash

Author: thedefinvestor

This past week has been a historic one for the cryptocurrency industry—and it wasn't a good one. As everyone knows, on October 11th, the crypto markets suffered a massive crash.

Specifically, on October 11th, over $19 billion worth of cryptocurrency positions were liquidated in a single day. In comparison, total liquidations during the FTX crash were only approximately $1.6 billion, a significant difference. What exactly happened? In short, the immediate trigger for this drop was China's announcement of restrictions on rare earth mineral exports, followed by Trump's announcement of 100% tariffs on Chinese goods. However, other theories are circulating in the market, including some suggesting a coordinated attack and others speculating that some large institutions were forced to sell assets after their positions were liquidated. Regardless of the cause, this incident undoubtedly served as a major stress test for DeFi. During this crash, it became clear which crypto giants withstood the pressure, and which suffered a complete setback. I. Outstanding Winners 1. Solana I'm a big supporter of the Ethereum ecosystem, but during this crash, the Ethereum Layer 1 network was completely unavailable. Ethereum's Layer 2 network also performed poorly: Arbitrum and Base transaction fees peaked at over $50, a cost that's clearly prohibitive for most users. Meanwhile, the Solana network operated flawlessly, with peak median fees at just $1—a reasonable performance considering the scale of the crash. Even more notably, Solana processed more transactions during this period than Ethereum's Layer 1 and all Layer 2 networks combined. In my opinion, this further proves that Solana has established itself in the crypto ecosystem and is no flash in the pan. 2. Money Markets: Major money markets like AAVE, Euler, Kamino, and Fluid have all experienced no defaults or operational issues, demonstrating robust performance. For example, AAVE liquidated $180 million worth of collateral in just one hour, without any issues—no mean feat, mind you. Fluid is particularly noteworthy for its partial liquidation mechanism. While other money markets liquidate positions in full if the loan-to-value ratio falls below a threshold, some Fluid borrowers only lost 2% of their collateral during this crash. As you can imagine, losing 2% of your collateral is far less painful than losing 100%. Overall, the currency market performed exceptionally well last week, once again demonstrating its resilience. Second, the biggest losers in the market crash were perhaps the centralized exchanges. Several leading centralized exchanges, including Binance and Coinbase, experienced outages, preventing users from placing orders or closing positions. While this may not be a fatal issue for spot investors, for many traders, the inability to add margin or close positions meant watching their positions liquidated. On Binance, for example, the price of ATOM plummeted 99.97% in just 10 minutes! It's important to note that ATOM is a mainstream asset with a multi-billion dollar market capitalization, not a meme coin without real value. Such unusual volatility inevitably raises questions about whether there's significant market manipulation behind it. It's worth noting that decentralized exchanges trading perpetual swaps haven't performed well either. Hyperliquid didn't experience any downtime (which is commendable), but its overly aggressive auto-deleveraging mechanism forced a significant number of traders to liquidate their profitable short positions during the crash. However, it should be noted that centralized exchanges also have automatic position-diminishing mechanisms in place to mitigate the risk of bankruptcy—this isn't unique to Hyperliquid. Another platform, Lighter, was down for four hours following the crash. On the positive side, however, Lighter's liquidation volume was smaller than Hyperliquid's due to its more trader-friendly automatic position-diminishing mechanism. Furthermore, the Lighter team has announced compensation for users affected by the outage, which is commendable. This shows that every protocol has its own strengths and weaknesses, and there's no perfect solution.

But ultimately, one thing is undeniable:

Decentralized exchanges are completely transparent—you can view all transaction activity in real time on-chain, and the platform cannot freeze your funds.

Centralized exchanges are the exact opposite. The fate of FTX is clear to all, and many centralized exchanges today also harbor hidden, shady backend operations.

Of course, for now, decentralized exchanges still need significant improvements in their user interfaces to achieve widespread adoption—this is an indisputable fact.

But in the long run, DeFi's ultimate victory is an irreversible trend.