One year after crypto's $20 billion liquidation day, the lesson for Bitcoin traders

<p dir="ltr">A year ago this weekend, crypto markets went through the largest forced-selling event in their history. Bitcoin set a <a href="https://investinglive.com/cryptocurrency/a-year-after-its-126-000-peak-bitcoin-trades-like-a-rates-bet-not-an-inflation-hedge/" rel="follow">record high</a> of $126,080 on 6 October 2025. Four days later, a sudden escalation in US-China trade tensions triggered a wave of liquidations that wiped out roughly $20 billion in leveraged positions over a single weekend. A year on, Bitcoin trades roughly a third below that peak.</p><p dir="ltr">The anniversary is worth marking for two reasons. First, the mechanics that turned a political headline into a market rout are still in place today. Second, October's reputation as a strong month for Bitcoin can make traders careless at exactly the wrong moment.</p><p dir="ltr">What happened in October 2025</p><p dir="ltr">On Friday 10 October (US time), President Donald Trump announced 100% tariffs on Chinese imports, effective 1 November. Risk assets sold off. Crypto trades around the clock and carries heavy leverage, so it took the hardest hit.</p><p dir="ltr">Bitcoin fell as much as 15%, dropping towards $100,000 on some exchanges. Ether fell more than 20%. Some smaller tokens briefly traded at or near zero on certain venues. When US markets reopened on Monday, spot Bitcoin and Ether ETFs recorded combined outflows of more than $755 million.</p><p dir="ltr">What a liquidation actually is</p><p dir="ltr">Many crypto traders use leverage, which means borrowing to take a bigger position than their own cash would allow. The trader puts up collateral, called margin. If the price moves far enough against the position that the margin can no longer cover the losses, the exchange closes the position automatically. That forced close is a liquidation.</p><p dir="ltr">At 10 times leverage, a move of roughly 10% against the trade is enough to wipe out the margin (fees can make it happen sooner). At 25 times leverage, a move of about 4% is enough.</p><p dir="ltr">When a leveraged long position is liquidated, the exchange sells into the market. That selling pushes the price lower, which triggers the next layer of liquidations, which pushes the price lower again. This chain reaction is called a liquidation cascade. Thin weekend trading makes it worse, because fewer buyers are available to absorb the forced selling.</p><p dir="ltr">The key point is that the size of the October 2025 drop was not only about the tariff news. It was about how much leverage had built up in the market, waiting for a trigger.</p><p dir="ltr">Why one green October proves nothing</p><p dir="ltr">Bitcoin's October record helps explain why traders were so comfortable going into last year's crash. Bitcoin has closed October higher in 10 of the past 13 years, with a median gain of about 15%. That track record gave the month its "Uptober" nickname.</p><p dir="ltr">October 2025 shows the limits of that record. Bitcoin made a new all-time high early in the month, crashed four days later, and still finished October down 3.7%.</p><p dir="ltr">Seasonal patterns describe what has happened before. They do not cause anything to happen. Thirteen years is a small sample, and a single shock can outweigh a pattern built over a decade.</p><p dir="ltr">This October has started reasonably well. According to CryptoQuant data, Bitcoin closed 3 October up 1.4% from its September close. That is a decent start, but it is not evidence of how the month will end.</p><p dir="ltr">What could matter more than the calendar this month</p><p dir="ltr">Macro conditions look more important than seasonality this October. The Federal Reserve meets on 27 and 28 October. Rate hikes remain a live possibility: in June, half of Fed officials projected at least one hike in 2026.</p><p dir="ltr">Bitfinex has argued that the main constraint on Bitcoin right now is the return available on low-risk assets, not sentiment towards crypto. If real yields keep rising, Bitcoin has to work harder to attract buyers, whatever the calendar says.</p><p dir="ltr">What to watch next</p><ul dir="ltr"><li>Open interest versus price. Open interest is the total value of open futures positions. If it keeps rising while the price goes nowhere, leverage is building, and that is the kind of setup that produced last year's cascade.</li><li>Funding rates. Funding is the regular payment between long and short traders in perpetual futures. Persistently high positive funding suggests the market is crowded on the long side.</li><li>The 28 October Fed decision, and the US data released before it.</li><li>Weekend liquidity. Big moves on thin weekend volume are more likely to be driven by liquidations than by real buying or selling.</li></ul><p dir="ltr">What would change the interpretation? If Bitcoin breaks out of its current range while open interest stays flat or falls, the move is more likely being driven by spot buying than by borrowed money. That would be a healthier signal.</p><p dir="ltr">For readers who use leverage, the practical lesson of October 2025 is about survival rather than direction. The question to ask is not whether October will be green. It is whether your positions could withstand a sudden 15% move on a quiet weekend. </p><p dir="ltr"></p> This article was written by Eamonn Sheridan at investinglive.com.