The crypto industry has grown accustomed to its fair share of dramatic moments. Nonetheless, the Black Friday crash of October 2025 will be remembered for 24 hours of pure chaos, even by crypto’s insane standards. It started with China tightening export rules. It ended with forced liquidations sweeping across every exchange. Here’s what happened, why it mattered, and what it revealed about the future of crypto markets.
What Caused the October 2025 Crypto Crash?
Tucked away in the mid-section of news reports on Thursday, October 9 2025, was a piece about China introducing new export controls on rare-earth materials. These minerals are critical to electronics, batteries, and semiconductors.
Many people were unhappy with this policy announcement, with Donald Trump chief amongst them.
The U.S. President announced via Truth Social that he would impose a 100% tariff on all Chinese goods, citing China’s restrictions as economic warfare. The market reaction was immediate and brutal:
- Bitcoin (BTC) dropped 15% in 20 minutes, hitting $104,000.
- Solana (SOL) fell nearly 40%.
- USDe, the synthetic stablecoin issued by Ethena, depegged to $0.62.
- USDT traded at a premium as investors flocked to safety.
The chain reaction didn’t stop at price charts. Within hours, billions in leveraged positions began to unwind, wiping out long positions at a scale not seen since March 2020’s “Black Thursday.”
This wasn’t a single bad headline, but rather a perfect storm of global macro uncertainty. However, crypto’s market structure didn’t help either. A bad situation turned worse thanks to a common culprit of crypto crashes – leverage.
How Leverage Turned a Market Dip Into a Meltdown
Leverage allows traders to borrow funds to amplify exposure, multiplying both gains and losses. In crypto, where prices can move 10% in an hour, that’s a dangerous game.
Over the past year, the perpetual futures (“perp”) boom created an illusion of easy money. Perp DEXs such as Hyperliquid, Aster, and Aevo became the new playgrounds for retail traders chasing yield. Many were trading with 10x, 25x, even 50x leverage, often with little understanding of how margin or liquidation thresholds actually work.
During this cycle, trading perps had become more of a social trend than a strategy. Telegram groups and X influencers broadcast open positions in real time, creating a feedback loop of copy trading and overconfidence. Everyone was a “market maker,” until the math caught up.When prices began to fall on October 10, the impact was immediate. Over $19 billion in leveraged positions were liquidated across major exchanges in less than 24 hours. Each liquidation, an automatic sell-off of collateral when a position’s losses exceed its margin, pushed prices even lower, triggering more forced sales in a cascading chain reaction.
By the end of the day, total open interest, the value of all active leveraged contracts, fell below $70 billion, a level not seen since May 2025. Billions in notional exposure simply vanished, as traders were wiped out faster than they could adjust collateral or hedge positions.
The lesson was stark: when liquidity thins and volatility spikes, leverage doesn’t magnify opportunity, it accelerates destruction.
Exchanges, Stablecoins, and DeFi: Who Withstood the Storm?
As prices collapsed and billions in leverage unwound, the weakest link wasn’t the blockchain, it was the market structure built around it.
Across the industry, several leading exchanges experienced severe strain. Withdrawals slowed, interfaces lagged, and in some cases, users were temporarily locked out of their accounts. The largest among them, Binance, confirmed “temporary withdrawal throttling” as market makers rushed to de-risk. For traders, it was a harsh reminder that even in a 24/7 market, access to funds can disappear without warning.
Most centralized platforms operate with limited public oversight. They custody client funds, issue internal credit, and set their own liquidation policies, all behind closed doors. When volatility hits, no one outside the exchange can see how much collateral remains or whether counterparties are meeting margin calls.
In traditional finance, this kind of risk is managed through capital requirements, stress testing, and real-time supervision. In crypto, where billions move through unregulated offshore venues, those safeguards don’t exist. That gap allows for behavior that would never pass in a regulated market, from rehypothecating customer assets to adjusting margin rules mid-crash.
Unfortunately, without clear standards for custody, reporting, capital adequacy and reserve requirements, this sort of outcome is likely to keep repeating itself every time a big volatility wave hits the markets.
Protecting Yourself in a 24/7 Market
Every market cycle produces its share of casualties, and lessons. October’s crash reminded everyone that in crypto, risk never sleeps.
The simplest way to survive events like this is also the most ignored: relax on the leverage. High leverage turns trading into gambling. Even professionals hedge, size positions carefully, and expect losses. For most investors, it’s not a tool, it’s a trap. Leave it to those with the systems, discipline, and capital to withstand the drawdowns.
Second, trade on regulated venues such as INX.One. When volatility hits, transparency is your only defense. Platforms operating under recognized regulatory frameworks are required to segregate client assets, maintain capital buffers, and disclose how custody works.
Finally, consider real-world assets (RWA) instead of chasing speculative altcoins. Tokenized stocks, treasuries, and funds represent ownership in assets, not promises of future hype. They’re programmable, liquid, and auditable, but grounded in something tangible. It’s how blockchain technology evolves from speculation to substance.
Because when the next wave of volatility hits, and it will, it won’t be the loudest traders who survive. It will be those who built on transparency, trusted real value, and learned to treat risk as a cost of entry, not a thrill of the game.
Why did China’s rare-earth export restrictions have such an outsized impact on crypto prices?
Because crypto is now deeply intertwined with global macro markets, shocks to supply chains or trade policy, like China’s rare-earth restrictions, can trigger liquidity shifts and investor risk-off behavior. Traders often liquidate volatile assets, such as cryptocurrencies, first, which amplifies market swings.
What role did U.S. policy announcements play in accelerating the crash?
When the U.S. announced steep tariffs in response to China’s export limits, it created sudden uncertainty about global economic growth. This fueled panic across both traditional and digital markets, leading institutional traders and market makers to pull liquidity from crypto exchanges, deepening the sell-off.
How do unregulated exchanges amplify risk during extreme volatility?
Unregulated venues can change margin requirements, freeze withdrawals, or operate with opaque balance sheets during a crisis. Without external oversight or capital requirements, these exchanges can become flashpoints for cascading liquidations when volatility spikes.
What’s the difference between trading synthetic stablecoins and asset-backed ones in a crisis?
Synthetic stablecoins rely on algorithmic or derivative structures, while asset-backed ones are supported by reserves like cash or treasuries. During stress events, synthetic coins are more vulnerable to depegging because their stability depends on market confidence and liquidity rather than hard collateral.
Why are real-world assets (RWAs) viewed as a safer alternative after events like this?
RWAs, such as tokenized stocks, bonds, or funds, represent ownership in underlying, tangible assets. Unlike purely speculative tokens, their value is tied to measurable fundamentals. In turbulent markets, they offer transparency, intrinsic worth, and regulatory protection, making them more resilient than leveraged crypto derivatives.
