Snapshot:

• Bitcoin’s October 10 plunge exposed how fast crypto liquidity can vanish when trading algorithms sound the red alert. The resulting liquidation cascade turned a macro jolt into a free fall.
• Market makers weren’t malicious, just risk-averse, but their simultaneous pullback revealed a systemic flaw: everyone’s code panics the same way.

When the Bids Vanished

On October 10, the crypto market went off-script. A White House tariff announcement on Chinese imports hit the wires; minutes later Bitcoin plunged more than 10%. What began as a macro wobble turned into a flash crash that briefly erased tens of billions in value – and exposed how thin crypto markets can be when volatility strikes.

Data from Kaiko show that order books “appeared empty” as sell orders sliced through bids across exchanges. Bitcoin fell toward $106,000 before stabilizing. The spark was obvious: tariffs. The violent reaction wasn’t.

A Liquidity Void

Kaiko’s data paint a clear picture: bid-side liquidity in BTC-USDT pairs sank to multi-month lows. Spreads blew out, and even the largest venues looked ghosted.

Galaxy Digital’s analyst desk summed it up bluntly: ‘High leverage, thin depth, one headline.’ Open interest was rich, risk appetite high, and once the shock hit, volatility spiked, hedging demand surged, and automated deleveraging kicked in.

Seconds before the plunge, spreads widened – suggesting algo …

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