Friday, October 10, 2025, became one of the most dramatic trading days in crypto’s history. Like a baby kicking and screaming, markets violently evaporated more than $20 billion in leveraged positions, liquidated in less than 24 hours. The move caught many traders off guard as excessive price swings and auto deleveraging (ADL) practices on crypto perp trading platforms made it difficult to lock in orders. Several leading exchanges temporarily halted activity to manage volatility and are offering restitution to some affected clients.
The sharp downward move was the largest since catastrophes like the Terra Luna’s stablecoin de-peg and the FTX exchange collapse, underscoring how quickly sentiment can shift in digital-asset markets.
During this period of systemic market volatility, Newton advised customers that pricing conditions were moving outside of normal ranges, while remaining fully operational and available to users. Our goal remains to provide Canadians with access to cryptocurrency in a regulated environment and to help users understand the inherent volatility that comes with digital assets.
ADL is a risk-management system used by crypto exchanges that offer futures or leveraged trading (a.k.a., perps, as described below). It automatically reduces the positions of profitable traders when the exchange’s insurance fund is unable to cover losses from liquidations. Effectively, ADL is intended to serve as an emergency tool when insolvent or bankrupt positions resulting from liquidations overwhelms an exchange's market making ability and depth, as perpetual futures are cash-settled contracts that only mirror spot crypto trading, but which are not settled by delivery of crypto assets. Instead, profits and losses from underlying trades are allocated from a shared margin pool, resulting in the need for ADL to reallocate exposure in an order book to maintain its balance.
Think of ADL as a last-resort safety valve that keeps the exchange solvent and fair when extreme volatility or thin liquidity causes liquidation losses too large for the system to absorb. Spot trading is not directly affected by ADL, as leverage or borrowing are not part of normal crypto trading.
The correction didn’t appear out of nowhere. Several conditions had been building for months:
The immediate catalyst for Friday's historic action came late Thursday after reports from Reuters and other outlets that China, which produces about 90 percent of the world’s processed rare earth mineral supply, had expanded its export control list. Beijing added five new rare earth elements and increased oversight of semiconductor manufacturers, tightening distribution of the sector ahead of planned talks between Presidents Donald Trump and Xi Jinping.
This re-escalated trade tensions with the U.S., resulting in President Trump suggesting he would impose a 100 percent tariff on Chinese goods. That single headline sparked a sell-off across risk-on assets, with equities dropping first and crypto following almost instantly in a wave of forced liquidations.
The Unchained podcast reported that roughly 30 minutes before Trump’s tariff announcement, new accounts on Hyperliquid (a decentralized perpetual futures platform for crypto) shorted Bitcoin (BTC) for hundreds of millions of dollars. Although this alone was not enough to move the market as much as it did, it appears likely this might have been happening on other exchanges as well. Semiconductor comments are watched by traders who know the sensitivity of this subject matter and were likely used as an indicator by accounts taking large Bitcoin short positions.
The event served as a reminder that market capitalization is not the same as liquidity.
When exchange order books lack depth and market makers step back, or are sidelined during ADL, price discovery can become extreme. A small number of sell orders can trigger outsized moves if there aren’t enough buyers to absorb them.
Historically, the Monday following a Friday capitulation in traditional markets tends to open lower. But because crypto trades 24/7, recovery patterns can unfold more quickly once forced selling exhausts itself.
Altcoins experienced the most severe moves. Many saw dramatic intraday price wicks as thin liquidity prevented orders from filling at expected prices. Over-inflated valuations, limited depth, and algorithmic trading amplifiers all contributed to steep price distortions. Some market makers appeared to struggle to maintain support, revealing just how dependent small and microcap tokens can be on continuous liquidity provision.
SOL dropped by 40%. Several smaller altcoins fell even more as market makers were unable to place orders or set prices after many exchanges went into auto-deleveraging (ADL). It is being reported that one of the smaller market makers collapsed entirely, and that is what sent some of the tokens it supported to near zero.
Buying Bitcoin in the spot market means purchasing the asset directly. Perpetual futures, or perps, are leveraged contracts that track Bitcoin’s price without requiring ownership. Spot buyers hold the asset itself, while perp traders take on added risk through margin and funding costs.
Friday’s sharp decline was driven less by spot selling and more by leveraged positions in perpetual futures. When traders use perps instead of owning Bitcoin or alt coins outright, liquidations can cascade quickly as prices fall, turning small changes in sentiment into large market swings. Overall altcoins suffered from thin liquidity and took a harder hit than Bitcoin.
To understand the scope of the sell-off, it helps to view Bitcoin as the market’s main liquidity gauge. As leveraged positions were unwound, Bitcoin moved lower alongside global risk assets, showing once again how macro headlines and cross-market sentiment can influence digital-asset flows.
While short-term volatility captured attention, the episode highlighted a consistent pattern. Crypto remains closely tied to broader financial markets and continues to be shaped by leverage and global policy expectations.
The events of October 10, 2025 highlight the value of risk awareness and balance. Crypto can move faster and more sharply than traditional markets, which is why planning and education matter. Staying informed, setting personal loss limits, and understanding liquidity risk all support responsible participation. Newton’s blogs and guides are designed to inform, not influence, helping Canadians make confident decisions based on clarity rather than hype.
