On October 10th, Binance released a comprehensive statement regarding the sudden collapse of the cryptocurrency market.
The company said the sharp decline was mainly due to macroeconomic trends, market maker risk protocols, and congestion on the Ethereum network, and argued that two platform-specific technical issues were not the cause of the crash.
The exchange said its matching engine, risk management and clearing systems operated without interruption during the process, and there were no system failures or downtimes across the platform.
According to Binance, a sharp decline occurred in global markets on October 10th due to trade war headlines. Cryptocurrency markets have become more vulnerable to this shock due to the accumulation of highly leveraged positions following the bull market that lasted until early October.
Open positions in derivatives markets are nearing record levels, with the size of open positions in Bitcoin futures and options reportedly exceeding $100 billion. On-chain data shows that many Bitcoin investors are making profits, creating an environment that could lead to sudden profit taking and forced liquidations.
Selling pressure was not limited to cryptocurrencies. On the same day, the U.S. stock market suffered a loss of approximately $1.5 trillion. The S&P 500 and Nasdaq posted their biggest daily declines in six months.
As sales accelerated, market makers activated algorithmic risk management and circuit breakers, according to the statement. These mechanisms automatically draw down liquidity to reduce inventory risk during periods of extreme volatility.
Citing data from Kaiko, Binance said that BTC liquidity on some exchanges has dropped to zero or close to it at certain levels, with buy orders effectively disappearing at the 4% price range. Each additional forced sale caused prices to fall more sharply than usual due to reduced liquidity in the examined order books. This process also disrupted inter-exchange arbitrage and risk management.
Ethereum network congestion was also a key factor during the outage. Gas prices have temporarily gone from single-digit levels to over 100 Gwei, and block confirmation times have increased. This slowed down the movement of funds between exchanges and arbitrage.
In an already illiquid environment, delays in capital inflows widened spreads and made position balancing more difficult. Binance said the situation created a short-term “liquidity gap” and amplified price volatility.
Binance said that the highest volatility occurred between 21:10 and 21:20, with approximately 75% of the day’s liquidations occurring before the three token downside events ($USDeBnsol, weth) reported at 9:36 p.m.
The macroshock reportedly began around 8:50 pm, with forced liquidations accompanied by scrutiny of the order book, accelerating price declines. The timing makes it clear that the main trigger was not a platform error, but a market-wide spiral of de-risking and liquidations, according to a statement from the exchange.
The company also shared details of two internal platform issues that it claims did not cause the crash.
During peak trading hours, the subsystem that facilitates the movement of funds between spot, earn, and futures wallets was slowed down for approximately 33 minutes. Matching and risk management continued to work, but the problem was observed only in the forwarding layer.
Some users had their balance temporarily displayed as ‘0’ on the interface. This was described as a UI issue and no funds were lost.
Unusual deviations in index calculations occurred during periods of reduced liquidity and slowed on-chain flows. $USDeWBETH, BNSOL tokens. According to Binance, this was due to over-weighting of Binance’s order book in index calculations and insufficient rigor against reference assets. Furthermore, in volatile markets, the deviation hedging parameters were not stringent enough.
Following the “$0 wick” pattern that appeared on ATOM/ on October 12th$USDT and IOTX/$USDT Due to very low liquidity, we announced that a front-end (UI) update has been made to the K-Line chart display. It is stated that this update is for visual optimization purposes only and does not affect actual trading data.
Binance announced that as of October 22, 2025, it has paid over $328 million in compensation to all affected users affected by both incidents.
*This is not investment advice.
