TLDR: Macro shock triggered $1.5 trillion equity losses and $100B+ Bitcoin derivatives liquidations globally.  Market makers withdrew liquidity automatically duringTLDR: Macro shock triggered $1.5 trillion equity losses and $100B+ Bitcoin derivatives liquidations globally.  Market makers withdrew liquidity automatically during

Binance Reveals Truth Behind October 10 Crypto Flash Crash: Macro Forces and Technical Glitches

2026/01/31 13:36
3 min read

TLDR:

  • Macro shock triggered $1.5 trillion equity losses and $100B+ Bitcoin derivatives liquidations globally. 
  • Market makers withdrew liquidity automatically during volatility, leaving most exchanges with zero bids. 
  • Ethereum gas fees spiked to 100 gwei, delaying arbitrage and widening spreads across trading venues. 
  • Binance compensated affected users $328M and launched $300M Together Initiative for broader support.

Binance has released a comprehensive report addressing the October 10, 2025 cryptocurrency market flash crash, separating platform-specific incidents from broader market dynamics.

The exchange acknowledged two technical issues while emphasizing that macroeconomic factors, market maker risk protocols, and network congestion primarily drove the downturn.

Binance confirmed full compensation totaling over $328 million for affected users and launched a $300 million goodwill initiative to support the broader crypto community impacted by market volatility.

Market-Wide Pressures Preceded Platform Strain

The October 10 crash emerged from a confluence of macro pressures that rattled global financial markets. Trade war headlines triggered sharp declines across virtually every asset class, with U.S. equity markets losing approximately $1.5 trillion in value.

The S&P 500 and Nasdaq recorded their steepest single-day drops in six months, accompanied by $150 billion in systemic liquidations.

Cryptocurrency markets faced particular vulnerability due to elevated leverage positions accumulated during months of rallies. Bitcoin futures and options open interest exceeded $100 billion across the derivatives market.

On-chain data revealed most Bitcoin holders were holding profits, creating conditions for rapid profit-taking once volatility struck.

Market makers responded to extreme price movements by activating algorithmic risk controls and circuit breakers. These automated systems reduced exposure and managed inventory, temporarily withdrawing liquidity from order books.

According to Kaiko data, Bitcoin liquidity approached zero on most exchanges except Binance, Crypto.com, and Kraken within a 4% price spread.

Ethereum network congestion compounded liquidity problems during the crash. Gas fees spiked from single digits to over 100 gwei, while delayed block confirmations slowed arbitrage and cross-platform flows.

This congestion widened spreads and hindered position rebalancing, amplifying price swings as market participants struggled to deploy liquidity across venues.

Platform Issues Identified and Remediated

Binance identified two distinct technical incidents that occurred during the market turmoil. The exchange emphasized that these platform-specific problems did not cause the flash crash itself.

Approximately 75% of daily liquidations had already occurred before the widely reported token depegs at 21:36 UTC.

The first incident involved asset transfer subsystem degradation between 21:18 and 21:51 UTC. A performance regression on database read operations surfaced under surge traffic volumes 5-10 times normal levels.

Some users experienced zero balance displays due to failed backend calls, though no actual funds were lost.

The second incident concerned index deviations for USDe, WBETH, and BNSOL tokens between 21:36 and 22:15 UTC.

Index calculations carried excessive weight from Binance’s own order books without sufficient anchoring to underlying reference values. Thin liquidity and slowed cross-venue flows exacerbated these temporary price dislocations.

Binance has implemented comprehensive remediation measures including enhanced caching, expanded database capacity, and tightened index parameters.

The exchange also launched the Together Initiative on October 14, providing a $300 million discretionary goodwill program for users affected by market conditions but not directly impacted by platform issues.

An additional $100 million low-interest loan fund supports institutional participants experiencing operational strain from market volatility.

The post Binance Reveals Truth Behind October 10 Crypto Flash Crash: Macro Forces and Technical Glitches appeared first on Blockonomi.

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