- October crypto crash hit BTC, ETH, XRP, ADA, driven partly by US bank fears
- Record Spot ETF outflows signaled institutional de-risking during the sell-off
- The $19B+ liquidation cascade further amplified the October market drop
The cryptocurrency market is going through significant pullback this October. After rallying early in the month, the total crypto market cap slid roughly 14% from its peak, according to data from TradingView, reflecting a sharp reversal in sentiment.
Driving this decline was a steep Bitcoin price drop, which retraced 17.7% from its recent all-time high near $126,272, plunging to briefly touch $103,530 before stabilizing near $110,300 as of this report. This heralded a broader crypto market crash affecting almost all the top cryptocurrencies.
‘Uptober’ Narrative Shattered: Broad Crash Hits Bitcoin, ETH, XRP, Cardano
The market crash caught many traders off guard, countering the typical “Uptober” bullish narrative that most had predicted by September month end.
Related: U.S. Treasury’s $2B Buyback Gives Bitcoin’s Uptober Rally the ‘Liquidity’ Shot
This abrupt shattering of the ‘Uptober’ expectation provoked an immediate scramble for explanation, driving urgent searches for underlying causes that instantly elevated search terms as ‘Bitcoin news’ and ‘Ethereum news’ within the digital public square.
Beyond Bitcoin’s plunge, similar sharp drops occurred in Ethereum (ETH), XRP, and Cardano (ADA), confirming the broad-based nature of the sell-off.
U.S. Bank Credit Fears Spooked Markets, Triggering Risk-Off Sentiment
Analysis suggests a primary catalyst originated from growing stress signals in the US regional banking sector.
The timing of the flash crash on October 10 overlapped with news that Zions Bancorp lost $50 billion to bad loans and Western Alliance pursuing litigation over alleged borrower fraud, alongside First Brands and Triocolor Holdings bankruptcies.
While these firms are not directly linked to crypto, the banking issues triggered broader contagion fears across Wall Street. Market volatility surged (VIX reportedly hit 28.99), its highest level since April’s trade tensions.
Comments from top Wall Street personalities, including JP Morgan CEO Jamie Dimon warning that regional banks may face deeper credit challenges amplified market anxiety, prompting a wider flight from risk assets, including crypto.
Record Spot ETF Outflows Signal Institutional De-Risking from Bitcoin, ETH
Layered onto the macro fears was a significant shift in institutional positioning, evidenced by massive outflows from US-listed Spot Bitcoin and Ethereum ETFs. A reported record daily outflow of $593 million occurred in a single day, signaling panic or strategic de-risking across the institutional investor base.
Government Shutdown Adds Layer of Uncertainty for Crypto Investors
Meanwhile, amid the ongoing confusion across the digital assets market came the news of a US government shutdown, which compounded issues for investors, driving them towards more stable options.
The backdrop to these market shocks has been the ongoing U.S. government shutdown. While not a direct trigger for the crash, it likely contributed to the heightened uncertainty and cautious investor sentiment. Delays in key economic data releases (like the delayed September CPI report) have made market participants quicker to de-risk when negative news hits.
Related: U.S. Shutdown Stalls 90 Crypto ETF Approvals in October, Freezes $10 Billion in Inflows
$19B Liquidation Cascade: How Leveraged Bets Amplified the Crash
The initial price drops driven by bank fears and ETF outflows noted above were amplified by a cascade of forced liquidations in the crypto derivatives market. As Bitcoin and major altcoins, XRP and ADA, breached key technical levels, automated stop-loss orders triggered, and highly leveraged long positions were liquidated due to insufficient margin.
Related: Ethereum Price Prediction: ETF Flows Support ETH But CPI Risk Keeps Traders Cautious
Reports indicate over $19 billion in leveraged positions were wiped out in a single session. This leverage flush demonstrates how excessive speculation built into the market structure can turn a pullback into a severe crash, adding immense selling pressure independent of the initial fundamental triggers. The sheer scale of these liquidations likely deepened the price decline for Bitcoin, Ethereum, XRP, and Cardano and damaged near-term market sentiment.
The Next Step for Crypto Traders
Notably, traders who lost significant amounts during the last crash may remain out of the market for a while, until they can regroup and relaunch themselves. Others may be waiting for a boost from institutional investors who have the capacity to introduce massive inflows that could move the market into bullish territory. Then, retail traders may re-enter the market manually or by triggering already-placed limit orders.
The latest crash saw 97% of the top 100 cryptocurrencies recording significant losses. However, many crypto users remain optimistic over an imminent rebound, especially with the expectation that the market would receive new energy when the US government resumes full activities after the current shutdown.
Related: CPI Data Holds Key to Bitcoin’s Halloween Fate: $120K Surge or $100K Dip?
October’s $19B+ crypto liquidations were triggered by: U.S. bank credit fears creating risk-off sentiment, record Spot Bitcoin & ETH ETF outflows signaling institutional selling, and these factors causing a cascade effect on over-leveraged traders.
Yes. Record outflows from Spot Bitcoin and Ethereum ETFs exert direct selling pressure on BTC and ETH. This negatively impacts sentiment and influences correlated altcoins like XRP and Cardano.
Market action is now showing consolidation after the flash crash. Bitcoin, Ethereum, XRP, and Cardano has since bounced off lows, but still remain below key resistance, suggesting traders are largely waiting for clearer directional signals before re-entering or further selling.
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