Crypto suffers record $25 billion crash as investors rush to hedge against another free fall

NEW YORK – Following the largest crypto liquidation in history on Oct 10, options market investors are bracing themselves for more volatility and further declines in Bitcoin and Ether, aggressively positioning in trades that offer protection against another potential free fall.

Market participants said the crypto sector on Oct 10 saw more than US$19 billion (S$24.7 billion) in liquidations across leveraged positions as panic selling and low liquidity triggered sharp swings.

The plunge came after US President Donald Trump announced late on that day a 100 per cent tariff on Chinese imports and threatened export controls on critical software.

Crypto analysts said this was the largest wipe-out in a 24-hour period in the market’s history, nine times larger than the February 2025 crash and 19 times bigger than the March 2020 meltdown and the FTX collapse in November 2022.

Bitcoin fell as low as US$104,782.88 during the Oct 10 to 11 period, down more than 14 per cent from its high of US$122,574.46 on Oct 10. It was last up 0.6 per cent at US$115,718.13. The world’s largest cryptocurrency hit a record high above US$126,000 on Oct 6.

Ether, the second-biggest digital currency, dropped 12.2 per cent to a low of US$3,436.29 on Oct 10. It last changed hands at US$4,254, up 2.4 per cent on the day.

Altcoins took an even bigger hit as Hybe (-54 per cent), Doge (-62 per cent), and Avax (-70 per cent) all experienced steep drawdowns before recovering to post more modest losses.

Mr Trump over the weekend softened his rhetoric on China, however, noting that “it will all be fine” and the US did not want to “hurt” China. That helped the crypto recovery. China on Oct 12 blamed the US for the escalation but did not roll out further countermeasures.

“Last Friday, you saw volatility just jump across the board, not only for short-dated, but also for long-dated maturities. The sentiment around short-dated volatility is that more people are worried about downward turns,” said Mr Sean Dawson, head of research at Derive.xyz in Canberra.

Data from Derive.xyz, a crypto options trading platform, showed heavy “put” buying from traders in Bitcoin and Ether, which suggested hedging against potential downside risks.

In Bitcoin, there were hefty purchases of puts conferring the right to sell Bitcoin at strike prices of US$115,000 and US$95,000 for the Oct 31 expiry, according to Mr Dawson. There was also a sharp reversal from call buying to call selling at the US$125,000 strike for the Oct 17 expiry, suggesting a bearish short-term view.

Calls in the options market reflect expectations that the price will increase.

Despite the meltdown, Mr Willy Woo, a leading onchain crypto analyst with more than a million followers on X, noted that Bitcoin investor flows have been holding up well and may be the reason it fared better than expected against a sharp decline in stocks.

In contrast, Mr Woo said he saw a large drop in Ether flows while Solana continued a decline. He believes that capital in altcoins is likely rotating into Bitcoin rather than leaving the system.

Altcoins, also known as alternative coins, refer to cryptocurrencies other than Bitcoin which are often treated as high-risk, high-reward investments. Some altcoins deliver massive returns, but many fail or lose liquidity.

Bitcoin, on the other hand, is widely viewed as a “blue-chip” crypto asset, widely held by institutions.

“The good news is that this (crash) has cleaned out the excessive leverage and reset the risk in the market, for now,” said Mr Nic Puckrin, crypto analyst and co-founder of The Coin Bureau.

“However, Bitcoin now faces another uphill battle to break past key resistance levels that will allow it to reach a meaningful new all-time high this year.” REUTERS