On Friday, October 10, the cryptocurrency sector endured a severe market downturn that triggered the largest single-day liquidation event ever recorded. Nearly $20 billion in leveraged positions were wiped out within a few hours, testing the robustness of both centralized and decentralized trading platforms.
Despite the widespread volatility, leading decentralized finance (DeFi) protocols demonstrated remarkable stability. Platforms such as Aave, Hyperliquid, and Morpho operated smoothly throughout the tumultuous trading session, reporting no outages and minimal user disruptions. This contrasts starkly with certain challenges faced by centralized exchanges during the same period.
The crisis was triggered in part by geopolitical developments, including announcements of 100% tariffs on imports from China by U.S. President Donald Trump. As a result, Bitcoin (BTC) fell sharply, dropping over 10% from above $120,000 to briefly dip below $103,000 on some exchanges. Various altcoins experienced even more dramatic declines, with Ethereum (ETH) falling below $4,000 and XRP reaching its lowest level since November of the previous year. The total crypto market capitalization plummeted more than 15%, falling from over $4.2 trillion to roughly $3.5 trillion within hours.
By the time of reporting, the market had largely recovered, with total capitalization rebounding to approximately $3.97 trillion, Bitcoin trading north of $114,000, and Ethereum back near $4,100. Nevertheless, traders and industry stakeholders continue to analyze the factors behind the massive liquidations—over 1.6 million leveraged accounts were affected—and assess how various platforms managed the volatility.
Centralized exchange Binance was a focal point during the crash, particularly due to anomalous price behavior involving USDe, a U.S. dollar-tied stablecoin issued by Ethena and traded on Binance. The token’s price unexpectedly dropped to as low as $0.6567 on Binance, while maintaining its peg close to $1.00 on decentralized exchange pools such as those on Curve Finance. Observers suggested that this divergence originated from technical issues within Binance’s trading infrastructure, including delayed price feeds and inactive market makers, potentially causing discrepancies in the exchange’s order book.
In response, Binance released a statement on October 12, denying operational failures and affirming that its core futures and spot trading engines as well as API services remained functional throughout. The exchange attributed the high volatility primarily to broader market conditions rather than internal faults. Binance also disclosed it compensated users impacted by the USDe depeg and issues with two other assets used as collateral for leveraged positions, disbursing approximately $283 million. However, some in the community questioned the completeness of these explanations, citing a lack of detailed timelines and liquidation data.
Within the DeFi sector, Aave confronted what its founder described as “the largest stress test” in the platform’s history. With over $42 billion in total value locked, Aave automated the liquidation of approximately $180 million in collateral within one hour, managing the process without manual intervention. This underscores the evolving capacity of decentralized systems to autonomously manage risk during market upheavals.
Overall, the market turbulence of October 10 served as a rigorous examination for both centralized and decentralized cryptocurrency infrastructures. While centralized venues encountered technical and liquidity challenges, the resilience of DeFi protocols highlighted their growing role as reliable components of the broader crypto ecosystem.
