Wave of Crypto Cleansings: How Major Liquidations Will Reshape the Digital Market

Black October: What Really Happened

October 10th saw the cryptocurrency market experience one of the most powerful shocks in its history. Within hours, traders’ positions collapsed, destroying billions of dollars in capital. But this was not just another daily price spike — it was a systemic restructuring of the market that revealed deep differences in how various participant categories manage risks.

At first glance, the event appears to be a standard market correction, but its scale and mechanics warrant a closer look. It involved a cascade of liquidations triggered by a combination of macroeconomic pressures, geopolitical tensions, and excessive leverage.

Why Systems Collapsed: The Mechanics of the Crash

Clearing events in crypto markets follow a clear logic. When a trader opens a position using borrowed funds, they must maintain a certain margin level. If the asset’s price moves against their position too quickly, the system automatically closes the entire position to recover the borrowed capital. On traditional markets, this usually isn’t problematic. But on cryptocurrency exchanges, where liquidity can be fragile, one forced sale can trigger a chain reaction.

Three factors created the perfect storm:

Excessive Leverage Created Fragility. Many traders entered the market with 10x, 20x, or even higher leverage. Any shock of 5-10% can trigger liquidation of such positions. The low survival threshold made the market vulnerable even to small impulses.

Low Order Book Depth Amplified the Drop. When forced sales begin and the order book has few buy orders, prices fall even faster. This attracts more liquidations, creating a downward spiral.

Macroeconomic Winds Blowing in One Direction. Federal Reserve policies, uncertainty over interest rates, trade tensions, and geopolitical risks simultaneously increased pressure on high-risk global assets, including cryptocurrencies.

Two Investor Universes: How Institutions Survived and Retail Suffered

The most instructive takeaway from October’s events is the contrast between the behavior of large institutional funds and retail speculators.

Institutional Players Acted Conservatively. They maintained low leverage levels, focusing on major assets like (Bitcoin, Ethereum), and therefore not only avoided liquidations but even strengthened their positions in some cases. Their caution now appears as wisdom. They understood: volatility is not the enemy if positions are properly structured.

Retail Traders Were Unprepared. Driven by social media, Telegram channels, and promises of quick riches, many retail participants entered the market with maximum leverage just before the correction. The outcome was predictable and tragic.

This contrast underscores a simple but vital truth: in a highly volatile market, risk management is not paranoia — it’s survival.

Where the “Smart Money” Flows: Ecosystem Reformation

October’s events also revealed a shift in the preferences of large capital. This is not just recovery — it’s reorientation.

Ethereum and Its Layers Are Becoming the Focal Point. Institutional capital is increasingly directed toward Ethereum Layer 1 and Layer 2 solutions, including Arbitrum. Why? Because these networks offer scalability without compromising security. Developers are migrating their projects there, and capital follows applications.

Solana and BSC Are Losing Their Initial Shine. This doesn’t mean these networks will die, but their growth rates have slowed. Concerns over centralization and network reliability have led to capital redistribution toward more conservative ecosystems.

RWA Trend Gains Momentum Among Institutions. Amid turbulence, tokenization of real-world assets (RWA) has become a beacon for large capital. Networks like Polygon, Avalanche, and Aptos are receiving investments from funds interested in real-use cases rather than pure speculation.

Stablecoins as a Market Reality Barometer

Data on stablecoin supply tell an intriguing story. The market is experiencing capital rotation, not influx. New money is hardly entering. Instead, existing capital flows between assets in search of better positions.

This has two consequences. First: short-term rallies are purely tactical and can reverse quickly. Second: stablecoins remain critically important for maintaining system liquidity. Their supply directly influences the speed of market recovery after shocks.

Macroeconomics as the Main Driver

No matter how autonomous crypto markets seem, they remain part of the global financial system. Three macro factors will continue to pressure prices in the medium term:

The Fed Is Not Rushing to Support. Every Federal Reserve rate meeting and signal of quantitative tightening directly affect global liquidity conditions. For risky assets like cryptocurrencies, this means risk appetite is either at its peak or at its trough.

Geopolitical Uncertainty Keeps Markets Tense. Trade wars, regional conflicts, sanctions — all create a background of chronic investor insecurity. When geopolitical risk is high, capital rushes into safe assets, and cryptocurrencies lose.

Global Liquidity Conditions Are Tightening. When central banks actively withdraw liquidity from the system, it’s felt everywhere — in stocks, bonds, commodities, and cryptocurrencies.

Healthy Shake-Up or Structural Crisis?

Debates are ongoing within the expert community, and there is merit to both sides.

Optimists see October’s events as positive development. They argue that reducing leverage is a necessary cleansing process, removing excess speculation. A less leveraged market is inherently healthier. This is not a crash but a reboot toward a more sustainable structure.

Pessimists warn otherwise. They see these events as symptoms of deeper structural problems. In their view, it will take months or even years to restore trust and launch a new growth cycle.

Historical perspective helps. May 2021 was similar: major liquidations, panic sell-offs, the end of the world seemed near. But the market recovered. Surviving startups launched new waves of innovation. Capital returned because blockchain technology remains revolutionary.

Recovery Corridors: What Could Help

Several factors could potentially push the market toward recovery in the medium term.

Increased Institutional Capital Inflows. As regulation becomes clearer and infrastructure more reliable, large funds are opening new positions. Their money can serve as a stabilizing force, creating a minimum demand level.

Market Structure Is Already Stronger. Leverage levels have fallen. More traders are using stop-losses. Exchanges have implemented better risk management systems. This doesn’t guarantee no more liquidations, but they will be less catastrophic.

Innovation Continues. Developers keep pushing forward. Layer 2 networks are becoming faster. RWA projects attract real use cases. This creates a foundation for future growth.

Conclusions: From Collapse to Reassessment

October’s shock reminded the crypto industry of a simple truth: volatility is not a bug, it’s a feature. A market that can be liquidated in hours demands respect for risks.

For retail investors, the lesson is clear: haste and maximum leverage are a sure path to losses. For institutions, the events confirmed the correctness of a conservative approach.

The road ahead remains uncertain. Restoring trust will take time. But every crash in crypto history has been followed by recovery and innovation. October 2024 may become a turning point, after which the market matures and participants become wiser.

The key is to learn lessons, revisit risk management, and remember: long-term wealth is built not on maximum leverage in speculation, but on a balanced portfolio and understanding one’s own risk tolerance.