Significant turmoil struck the cryptocurrency markets on October 10th, with widespread liquidations totaling approximately $19 billion to $20 billion. This marked a record-breaking day for deleveraging, impacting numerous traders and exchanges.
Hyperliquid experienced the largest volume of liquidations, exceeding $10 billion, while Binance saw roughly $2.4 billion. Altcoins were particularly affected by the selling pressure, while Bitcoin experienced comparatively less volatility.
Jonathan Man, a portfolio manager at Bitwise, estimated that the total open interest (OI) in futures contracts across different exchanges decreased by around $65 billion during this market downturn. This reset the market to levels similar to those observed in July.
The liquidations primarily occurred on offshore platforms, with Hyperliquid and Bybit experiencing the highest volumes. Interestingly, Binance’s share of liquidations was lower than typically seen during such events.
CME managed to maintain a larger portion of Bitcoin futures OI throughout the selloff. Coinglass data indicates that CME, Binance, Bybit, and OKX are currently the top platforms for Bitcoin futures trading by notional value.
Despite this significant market event, Bitcoin is down only about 8% from its peak value of $126,000, currently trading at $115,058.29 as of the time of this writing.
Major altcoins have also demonstrated notable recoveries. Ethereum, XRP, and Dogecoin have all increased in value by approximately 10% since October 10th. BNB has risen by 15.6% during the same timeframe, recently achieving a new all-time high of $1,375.11 on October 13th.
Solana has gained 8.3% in value since the liquidations, while Cardano has recovered by 13% during the same period.
Funding Rates and Basis Compression
Perpetual swap funding rates for major cryptocurrency pairs turned negative or approached zero on October 10th and 11th.
Furthermore, Glassnode reported that aggregate funding rates reached their lowest point since the bear market of 2022, confirming a significant deleveraging event. Exchange data showed neutral to negative eight-hour funding rates on Binance, OKX, and Bybit around the market’s low point.
Altcoin perpetual contracts saw an even more dramatic shift. Solana’s eight-hour funding rate fluctuated around -0.23% on multiple occasions on October 11th. This “pay shorts” scenario, where short positions are favored, is a rare occurrence and indicates a transition from heavily leveraged long positions to a more defensive market stance.
This funding rate change coincided with a significant decrease in altcoin open interest (OI) and a compression of the basis across dated futures contracts, which is a typical characteristic of a leverage purge primarily affecting altcoins rather than Bitcoin.
By the end of the weekend, data showed monthly Bitcoin contracts on Deribit returning to approximately 8% annualized, moving from slightly overheated to neutral. This is considered a positive sign, indicating a reduction in market fragility.
ETF Flows Leading Up to the Crash
Data from Farside Investors on US-traded spot Bitcoin ETF inflows revealed strong net inflows earlier in the week, which decreased leading up to the crash and then turned slightly negative on October 10th.
BlackRock’s IBIT saw inflows of $899.4 million on October 7th and $426.2 million on October 8th. By October 9th, inflows into IBIT had slowed to $255.5 million, while Fidelity’s FBTC experienced outflows of $13.2 million, and Grayscale’s GBTC saw redemptions of $45.5 million, resulting in a combined net inflow of nearly $198 million.
On the day of the crash, IBIT inflows decreased to $74.2 million, and other issuers’ inflows turned negative.
Consequently, the day’s net flow became negative by $4.5 million, ending a nine-day streak of positive net inflows. While the outflows were small, they signified a shift from previous sessions of dip-buying behavior.
The sequence of events is noteworthy. ETF inflows between October 7th and 8th were followed by weaker net buying and a small net outflow on October 10th. Simultaneously, funding rates and the basis compressed significantly, confirming deleveraging in perpetual and dated futures markets.
The combination of declining spot ETF demand and the clearing of leverage in the derivatives market helps explain the sharp price drop and the subsequent quick stabilization.
Liquidity and On-Chain Resilience
The market stress was most pronounced in areas with limited liquidity. Several altcoins briefly traded near zero on some exchanges as leverage unwind pullbacks created temporary “air pockets” in specific trading pairs.
Bitcoin recovered more rapidly due to its deeper order books and the presence of a growing ETF buyer base.
Altcoins, lacking the same level of ETF-driven demand, bore the full impact of derivative deleveraging through cross-margin collateral sales, negative funding rates across altcoin perpetual contracts, and fragmented liquidity that exacerbated losses in the broader market.
The deleveraging event removed $65 billion of speculative positions from the market in a single day. Until leverage is rebuilt and market makers broaden their offerings again, altcoins are likely to remain more volatile than Bitcoin.
Despite the market turbulence, this event represents a significant reset. The reduction in forced sellers, the modest rebuilding of the basis, and the gradual return of funding rates toward neutral suggest that the market is now less fragile than it was a week ago.