Debate Emerges Over Cause of Sudden Crypto Crash on October 10

The sudden plunge of the cryptocurrency market on October 10th has sparked significant disagreement between exchange leaders and the trader community. Both sides have different interpretations of the factors that triggered this mass liquidation. This divergence of views reveals a broad gap in understanding of market mechanisms and leverage dynamics within the increasingly complex crypto ecosystem.

Divergent Perspectives Between Exchange Leaders and the Trader Community

According to information from NS3.AI, cryptocurrency exchange executives tend to attribute the sudden price drop to the impact of leveraged loop results on USDe, a stablecoin issued by Ethena. They emphasize that this mechanism creates a chain reaction effect that triggers massive position closures across the market.

In contrast, traders and market analysts have a different interpretation. They argue that the root cause lies in more fundamental market structures—specifically, extremely limited liquidity and a market mechanism design that contains structural flaws. They point out that when trading volume drops sharply, the impact of any large transaction becomes highly amplified, creating volatility that is difficult to control.

Leverage Mechanisms and Market Vulnerability

Leverage issues have long been a concern for regulation and market research. When traders use high leverage to amplify their exposure, any unexpected price movement can cause total liquidation of positions. During the October 10th event, this sudden phenomenon occurred simultaneously across many traders, creating a cascade effect that shook the entire market.

This debate highlights a fundamental concern: whether the problem lies with specific financial products (such as the USDe loop), or with the still immature crypto market infrastructure. This question is crucial because it will determine the appropriate solutions to implement.

Long-term Implications for Market Stability

This disagreement is not merely a technical difference of opinion but reflects the need for a deeper understanding of systemic risks in cryptocurrency trading. High leverage holders, limited liquidity, and suboptimal market mechanisms create ideal conditions for sudden crashes like the one on October 10th.

The lesson from this event is that crypto market stability requires a multi-dimensional approach: improving liquidity infrastructure, tightening leverage risk oversight, and designing more robust market mechanisms. Without comprehensive action, the risk of similar events occurring remains high in the future.