Crypto Investors Lose Billions in the Biggest Liquidation Event Ever: MoneySense

As noted in the previous edition of this column, Bitcoin’s (BTC) strongest months have historically been October and November, with average gains of 21.89% and 46.02%, respectively. In keeping with this promise, the crypto market started strong in October as BTC rose from approximately $114,000 (all figures in US dollars unless otherwise stated) on October 1 to a new high of over $126,000 on October 7. Ethereum (ETH), XRP, Solana (SOL), Binance Coin (BNB) and other altcoins also saw impressive runaway gains in the first week of October.

But the optimism was quickly, if only temporarily, sucked out of the crypto market when the prices of BTC, ETH and other crypto coins took a sharp drop from October 10 to 17 before stabilizing.

As of October 28, BTC is trading flat, between $113,000 and $115,000, close to the price it was at the beginning of the month.

The chart below shows the ups and downs of the crypto market over the past month, as represented by the Coinmarkcap (CMC) 20 Index, an index of the top 20 cryptocurrencies by market capitalization, excluding stablecoins.

Crypto’s Largest Liquidation Event Ever: $19.16 Billion Lost

In a 24-hour period from October 10 to 11, the cryptocurrency market experienced the largest liquidation event in its history, triggered by Trump’s announcement of a possible 100% tariff on China, in addition to certain export controls.

A ‘liquidation event’ is a short period of time during which traders are forced to close their leveraged crypto positions due to a sharp and sudden drop in price.

On October 10 and 11, a sharp price drop forced traders with long positions in crypto assets to liquidate as the market went against their bet. These liquidations caused the market to fall further, which in turn led to additional liquidations with a cascading effect. Here’s how bad it was:

• More than $19 billion in leveraged positions in the crypto market were liquidated
• Of that $19 billion, about $16.7 billion was long positions – bets that the market would go up
• An estimated 1.6 million traders were liquidated through crypto exchanges and platforms

During the October 7 to 17 price drop, BTC fell more than 17% (from about $126,000 to just over $104,000) and ETH fell more than 21% (from about $4,700 to about $3,700).

For historical context, here are the five largest liquidation events in the history of the crypto market Coinglass.com

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Should the liquidation scare you?

Was the October liquidation a long-term buying opportunity or a sign of more turbulence to come? There’s no way to know for sure, but here’s one way to answer the question:

• Short-term investors those hoping for a great year-end rally would do well to be cautious, as they won’t have time to ride the market’s ups and downs without panic selling their positions.
• For long-term investors For those who believe that the price of BTC could reach $500,000 to $1,000,000 in the next five to ten years, the drop to $104,000 certainly seems like a good opportunity to buy the dip.

The Canadian crypto exchange has been fined $177 Canadian dollars by FINTRAC

If you’re a crypto investor in Canada or are thinking about dipping your toes into the market, it pays to choose your crypto exchange carefully so you don’t get taken advantage of, fall prey to scams, or support a company involved in illegal activities.

Canadian crypto exchange Cryptomus was fined a whopping CAD$177 million by the Financial Transactions and Reports Analysis Center of Canada (FINTRAC). FINTRAC found more than a thousand cases in which Cryptomus failed to adequately report transactions and crypto wallets linked to serious criminal activity. Although the crypto market is much more mature and better regulated than it was five years ago, it unfortunately remains a hotbed of financial scams and other criminal activities.

To protect themselves and promote the use of crypto in Canada for lawful purposes, Canadian crypto investors should know that crypto exchanges in Canada are regulated by the Canadian Securities Administrators (CSA), the regulatory body responsible for harmonizing securities regulations across the thirteen provinces and territories.

On its website, the CSA provides a list of crypto platforms authorized to do business with Canadians and that one banned in Canada. Canadian crypto investors would do well to review both lists before deciding which platform to use.

Crypto price fluctuations are common

Cryptocurrencies, including BTC, ETH, XRP, SOL, BNB and others, are speculative and highly volatile assets that are subject to significant price fluctuations. Even stablecoins, which are ostensibly “safe,” can be risky if they are not sufficiently backed by real assets.

Investing in bitcoin and other cryptocurrencies involves significant market, technological and regulatory risks. Only invest in crypto if it aligns with your broader investment goals, time horizon and risk profile, and always remain vigilant against crypto scams.

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About Aditya Nain

Aditya Nain is an author, speaker and lecturer who writes about Canadian investments, personal finance and crypto. He is the co-author of two books and has taught at universities for twelve years.