Friday Nov 7 2025 23:40
2 min
Just four days after Bitcoin reached a new all-time high on October 6th, 2025, the cryptocurrency market experienced an unprecedented crash on October 10th, now infamously known as the '10/10 flash crash'. This event led to significant losses, with major cryptocurrencies plummeting and many altcoins going to zero, while exchanges teetered on the brink of bankruptcy.
Despite initial optimism surrounding the potential benefits of a Trump presidency for the crypto industry, crypto asset prices continued to decline. Aside from a brief rally following Trump's election last November, the overall cryptocurrency market capitalization (TOTAL) has remained relatively stable compared to the S&P 500 index.
The situation was further complicated by the bankruptcy announcement of Stream Finance, a 'trust-me-bro' yield fund managing $200 million in assets. The fund suffered approximately $93 million in losses due to the mismanagement of its 'external fund manager'. Stream Finance is likely the first fund to publicly declare bankruptcy due to the 10/10 auto-deleveraging mechanism.
The collapse of Stream Finance triggered panic throughout the DeFi ecosystem, as investors began withdrawing funds from similar high-risk yield strategies.
This incident highlighted the risks associated with the increasingly popular 'recursive stablecoin farming' strategies within DeFi, which involve using deposit receipts from existing high-risk strategies to leverage and generate even higher returns.
The losses incurred by Stream Finance served as a stark reminder of the massive losses that 'delta-neutral' funds can experience in the event of auto-deleveraging. It remains unclear who is holding the most risk in this market, and whether the market has sufficient liquidity to handle a potential future wave of liquidations.
With lawsuits emerging against centralized exchanges alleging insufficient assets during the 10/10 liquidation, the question is no longer 'if something will happen?', but 'can the entire industry withstand it?'
Risk Warning: this article represents only the author’s views and is for reference only. It does not constitute investment advice or financial guidance, nor does it represent the stance of the Markets.com platform.When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice. Trading cryptocurrency CFDs and spread bets is restricted for all UK retail clients.
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