The largest liquidation event in crypto history

October 12th, 2025

• How does this compare to previous crashes
• Detailed comparison
• The psychology of the moment
• Is this the best time to buy
• What history tells us
• The emotional cycle
• Final thoughts

Two days ago, crypto experienced something it had never seen before. It wasn't just another correction, nor just another dip. It was the largest forced liquidation event in the history of cryptocurrency markets.

$19.1 billion in positions wiped out. $400 billion evaporated from total market cap. Bitcoin dropped to $101,500. Ethereum fell to $3,373. Altcoins bled harder. Funding rates flipped negative. The cascading liquidations were relentless.

If you were watching the charts, you know exactly what it felt like. Panic. Disbelief. That sinking feeling in your stomach as you watched your portfolio numbers collapse in real time. Crypto Twitter went into meltdown:

"Just got liquidated. 6 months of gains wiped in 2 hours. I'm done with crypto."

"We're going to zero. This is it. Bull run over. Pack it up."

"I should have sold at $110k. I knew it. Why am I so stupid?"

"If you're not scared right now, you're not paying attention. This feels different."

It's the same script every time. When markets are crashing, it feels like they'll never stop. Your brain is wired to extrapolate the present into the future. This is a survival mechanism that evolved over millions of years. If you saw a predator yesterday and today, your brain assumes there will be predators tomorrow, so you stay alert and survive. This worked brilliantly for avoiding lions on the savanna.

But it works terribly for investing. When everything is green, your brain extrapolates endless gains. You feel invincible. Risk feels negligible. You start thinking "this time is different" and pile in at the top. When everything is red, your brain extrapolates endless losses. You feel doomed. Risk feels existential. You start thinking "it's going to zero" and sell at the bottom.

Neither is true, but in the moment, it's almost impossible to believe otherwise. Your emotional brain hijacks your rational brain, and suddenly the only thing that makes sense is to act now, to do something, to make the pain stop.

How does this compare to previous crashes:

Let's put this into perspective. This liquidation event was the largest ever recorded, but it's not the first time crypto has experienced massive deleveraging. Here's how it compares:

Detailed comparison:

Note: Smaller cap altcoins typically fall 2-3x harder than Bitcoin. ETH usually drops 1.2-1.5x more than BTC.

The psychology of the moment:

Here's what makes these moments so brutal: your emotions are screaming at you to do something. Sell now before it gets worse. Cut your losses. Protect what's left. Your rational brain knows that selling at the bottom is a mistake, but your emotional brain is in survival mode. It doesn't care about long-term strategy. It cares about pain, and it wants the pain to stop.

Everyone in the market is feeling the same thing. The fear is contagious. You open Twitter and see people posting their liquidation screenshots. You see people saying they lost everything. You see the fear, uncertainty, and doubt multiplying across every channel. It feeds on itself.

But here's the thing about panic: it's temporary. Prices are a function of supply and demand, but in moments of extreme fear, prices become a function of emotion. When everyone is forced to sell at the same time, the price isn't reflecting the fundamental value of the asset. It's reflecting the collective panic of overleveraged traders who are being forced out of their positions.

Once the liquidations are done, once the forced sellers are out, once the panic subsides, something interesting happens. The price stabilises. Then it starts creeping back up. Slowly at first. Then faster. And the people who sold at the bottom, who capitulated in the moment of maximum fear, they watch from the sidelines as the market recovers without them.

Is this the best time to buy:

Historically, yes. Not because the bottom is guaranteed to be in. Not because there's no risk of further downside. But because the risk-reward is asymmetric. When fear is at its peak, when sentiment is at its worst, when everyone is convinced it's going lower, that's when the best opportunities appear.

The COVID crash bottom was the trade of the decade. The FTX bottom was the trade of the cycle. Will this be the same? No one knows. But the pattern is clear: major liquidation events create generational buying opportunities.

The problem is that it doesn't feel like an opportunity in the moment. It feels like you're catching a falling knife. It feels like you're buying something that's going to keep going down. Your brain is telling you to wait. Wait for confirmation. Wait for the market to stabilise. Wait for prices to start going back up.

But by the time you get confirmation, by the time the fear subsides, by the time everyone agrees that the bottom is in, the price is already 20-30% higher. The best entries happen when it feels the worst.

What history tells us:

Every major crash in crypto has been followed by a recovery. Sometimes it takes weeks. Sometimes it takes months. Sometimes it takes a year. But the pattern is consistent: forced liquidations create bottoms, and bottoms create opportunities.

The people who bought Bitcoin at $4,000 during COVID felt like idiots for the first few weeks. Then they felt like geniuses for the next year. The people who bought Bitcoin at $16,000 after FTX felt like they were catching a falling knife. Then they watched it climb to $73,000.

The people buying now at $101,500 probably feel sick. They're probably questioning whether this is the right decision. They're probably checking the price every five minutes, watching for signs of further collapse. But if history is any guide, they'll be looking back at this moment in six months wondering why they didn't buy more.

The emotional cycle:

Crypto markets move in cycles, but so do emotions. When prices are rising, greed takes over. FOMO kicks in. Everyone feels like a genius. Risk tolerance goes through the roof. Leverage gets maxed out. People start thinking it'll never end.

Then the crash comes. Greed turns to fear. FOMO turns to panic. Everyone feels stupid. Risk tolerance collapses. Leverage gets liquidated. People think it'll never recover.

But it does recover. It always has. The question is whether you have the conviction to buy when it feels the worst, or whether you'll wait until it feels safe again. By the time it feels safe, the opportunity is gone.

Final thoughts:

The largest liquidation event in crypto history just happened. Billions wiped out in hours. Fear is at extremes. Sentiment is broken. Everyone is scared.

Which is exactly why this might be one of the best buying opportunities we'll see this cycle.

History doesn't repeat, but it rhymes. COVID crash, FTX collapse, and now this. The setup is the same. Maximum fear. Maximum liquidations. Maximum pain. And on the other side of maximum pain, historically, has been maximum opportunity.

Will it be different this time? Maybe. There's no guarantee. But if you're sitting on the sidelines waiting for confirmation, waiting for the fear to subside, waiting for prices to stabilise, you're probably going to miss it. The best trades happen when it feels the worst. And right now, it feels pretty bad.

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Related

• Some thoughts / predictions on the current state of the space
• The attention-liquidity cycle of memecoins
• Psychology