During the substantial cryptocurrency market downturn on October 9-10, several altcoins on Binance, including Cosmos’s ATOM, IoTeX’s IOTX, and Enjin’s ENJ, experienced a sudden and dramatic price collapse, briefly touching zero on the exchange. This unusual occurrence was confined to Binance, as these tokens maintained significant value on other centralized crypto platforms.
The market-wide decline was severe, marking the harshest drop since the collapse of FTX. The total crypto market capitalization fell by nearly $850 billion within hours. Bitcoin (BTC) saw a decrease of approximately 10-15%, dropping from highs near $124,000 to lows around $105,000. However, altcoins faced a more intense hit, particularly on Binance, where some tokens plunged by 99.99-100% in just minutes.
While Binance prices for ATOM, IOTX, and ENJ dipped to zero briefly, competing exchanges reported significantly less severe losses: ATOM dropped roughly 53%, IOTX 46%, and ENJ about 64.5%. At no point did these coins reach zero value elsewhere, spotlighting the anomaly specific to Binance’s trading systems during the crash.
The catalyst behind this situation was the liquidation of nearly $20 billion worth of crypto positions during the crash, a volume about 20 times greater than during the 2020 COVID-19 market plunge. Over 1.6 million traders were liquidated, many of whom had utilized leveraged positions on Binance to maximize returns.
Arthur Hayes, co-founder of BitMEX, explained that large exchanges, including Binance, were forced to liquidate collateral tied to cross-margin accounts. This process accelerated selling pressure, as collateral altcoins were automatically sold to cover losses when prices began to fall.
Amid this intense sell-off, Binance’s infrastructure faced extreme strain. Users reported technical difficulties such as frozen accounts, missed stop-loss triggers, and delayed order executions. This liquidity and operational stress prompted major market makers like Wintermute to withdraw funds from the platform temporarily.
The absence of sufficient buy orders at certain moments led Binance’s trading system to display prices at zero for some tokens, even though their true market value remained intact elsewhere. This phenomenon is reminiscent of a similar flash crash in 2017, when Ethereum briefly dropped to $0.10 on GDAX following a cascade of automated sell orders.
In response, Binance officials issued public apologies. Chief Customer Service Officer Yi He acknowledged transaction issues caused by the surge in volatility and platform traffic, while CEO Richard Teng expressed regret to affected users, emphasizing the exchange’s commitment to learning from the event and improving platform resilience.
Binance also announced it will compensate users who suffered verifiable losses directly attributable to platform or system failures. However, losses linked only to normal price fluctuations or unrealized positions will not be eligible for reimbursement.
This incident underscores the vulnerabilities in crypto exchange infrastructure during periods of extreme market volatility and highlights the risks of leveraged trading. Investors are advised to carefully assess risks and conduct thorough research before engaging in leveraged positions.
