How a $19B Crypto Liquidation Triggered Bitcoin’s Bear Market

The turning point was both swift and structural. On October 10, 2025, Bitcoin experienced what is now described as the largest crypto derivatives liquidation event on record, with approximately $19 billion in futures positions forcibly unwound. CryptoQuant contributor Darkfost argues the damage was profound, noting that open interest—a key measure of outstanding derivative contracts—collapsed by about 70,000 Bitcoin in a single day. This erased over six months of accumulated leverage, resetting open interest to levels last seen in April 2025. “That’s the equivalent of more than six months of Open Interest accumulation erased in one session,” Darkfost wrote. The velocity of this liquidity destruction was the critical factor, compressing the market’s speculative capacity almost instantaneously.

Darkfost’s central thesis is that October 10 “was really the one that pushed BTC into a bear market” because it broke the market’s underlying mechanics. The event wasn’t merely a price correction; it was a sudden, severe reduction in the system’s ability to carry leverage, which is a lifeblood for crypto market activity. This view found resonance with other market observers like Bitcoin Capital, which replied that “nothing has been the same after 10/10” and that “it actually feels like something broke.” The path to recovery, as Darkfost bluntly stated, requires a lengthy rebuild: “It needs to be rebuilt and it can takes months …” Since the flush, open interest has stagnated, struggling to regain its former momentum, leaving speculation in a diminished state.

The damage from the derivatives cascade quickly spread to other facets of market liquidity. Darkfost widened his analysis to highlight a concurrent drain in stablecoin reserves, a crucial source of buying power in crypto markets. He noted that stablecoin outflows from exchanges have coincided with an approximate $10 billion decline in the aggregate stablecoin market capitalization over the same period. This represents a significant headwind, removing dry powder for risk-taking at a time when leverage was already being aggressively derisked following the futures liquidation.

Perhaps the most telling sign of broader market disengagement is the sharp contraction in spot trading volumes. Darkfost reported that since October, Bitcoin spot volumes have been roughly halved. He provided a stark comparison: in October, volume on leading exchange Binance “had nearly reached $200B,” alongside $53 billion on Gate.io and $47 billion on Bybit. At press time, Binance’s volume stands at approximately $104 billion. This isn’t interpreted as a simple lull in activity, but as a return to “levels among the lowest observed since 2024,” signaling fundamentally weaker investor demand. The confluence of shattered futures leverage, stablecoin outflows, and evaporating spot activity paints a picture of a market in retreat.

The current market setup, as characterized by Darkfost, “remains uncertain and does not encourage risk-taking.” The October 10 event was a major driver of the ongoing correction—now in its fifth consecutive month—but it is “not the only factor at play.” The compounded effect of derivatives liquidation, stablecoin contraction, and spot volume decline has created a self-reinforcing cycle of caution. Liquidity destruction in an already uncertain environment, Darkfost argues, “is not conducive to a return of speculation, which is nonetheless a key component of the crypto market.”

For a durable recovery to take hold, the market structure broken in October must be meticulously rebuilt. Darkfost suggests this requires vigilant monitoring of liquidity conditions and, “above all,” a sustained return of spot trading volumes. The process is inherently slow, as confidence and the apparatus for speculation need time to re-form. At press time, with Bitcoin trading at $78,723, the market exists in a state of fragile equilibrium, awaiting the signals that liquidity and speculative appetite are returning in force. The legacy of October 10, 2025, is a market that learned how quickly its foundations can be washed away, and now must determine how to build them back.