The collapse on October 11: When the "anonymous central bank" of crypto can no longer intervene

The history of the cryptocurrency market has just recorded a painful lesson. Tom Lee, co-founder of Fundstrat and Chairman of BitMine, recently pointed out that the sharp crash was not caused by policy expectations or other macro factors, but is a direct consequence of the breakdown of the intrinsic market mechanism. Bitcoin is currently trading around $90.69K with a 0.22% decrease in 24 hours, Ethereum at $3.11K, both reflecting the tremors from liquidity crises still being mended.

Structural Wounds: When Market Makers Have to Cut Losses Urgently

According to detailed analysis from experts, on October 11, market makers suffered enormous losses of up to $19-20 billion. These organizations operate like a “discreet central bank,” providing continuous liquidity and stabilizing prices through high-frequency order matching.

However, when mechanical liquidation waves swept through the market, their risk management models completely collapsed. Not only was capital depleted, but the market’s last safety nets were also destroyed. Forced to quickly withdraw capital to balance their balance sheets, market makers retreated from the market, leaving a huge mechanical gap.

Liquidity Disappears: When Order Books Are Only 2% Deep

As capital flows out of the market, the depth of the order book plummets to terrifying levels. At certain moments, liquidity evaporated up to 98%, leaving only a very sparse trading space.

This phenomenon is akin to a “crypto version of quantitative tightening” – not from any central authority’s decision, but from the market’s survival instinct under extreme stress. With the order book becoming severely constricted, just a small amount of selling is enough to break the price, triggering a series of forced liquidations. Predatory traders exploit the situation to push prices down further, creating a negative spiral where prices no longer reflect the true value of assets but only the collapse of the market mechanism.

Recovery Phase: Rebuilding the “Firewall” of Liquidity

Historical experience shows that pure liquidity crises typically take about eight weeks to fully recover. Currently, the market has entered its sixth week of healing. Market makers are actively rebuilding liquidity provision capabilities through reducing positions, increasing capital, and strengthening risk management.

Although the market’s “ecosystem” remains chaotic, the most intense bleeding phase seems to have ended. Some smart organizations have begun repositioning. For example, BitMine Immersion Technologies bought 54,000 ETH at an average price during the decline, totaling about $173 million – a clear signal that smart money views this event as a temporary liquidity shortfall rather than a long-term cycle reversal.

Investors and Opportunities Ahead

Liquidity is the oxygen of the market. Once capital flows back, prices tend to rebound faster than expected. As the balance sheets of market makers gradually recover, combined with the potential of new policies bringing bright expectations, Bitcoin and the entire crypto ecosystem could witness a strong “counterattack recovery” wave.

The current phase tests investors’ patience. Do not confuse technical issues with fundamental weakness, nor retreat from positions at the darkest moments. History shows that when order books are refilled after a crisis, a new momentum often returns with doubled strength.

To get through this phase, cautious allocation and risk control remain the key that cannot be replaced.