Author: Jack Inabinet, Source: Bankless, Translated by: Shaw Jinse Finance
On October 6, 2025, Bitcoin hit a new all-time high, breaking the $126,000 mark. Holders were immersed in an atmosphere of optimism that could be felt everywhere, from the corners of cryptocurrency forums to the newsrooms of CNBC.
Although the fundamentals may not have changed much in the following month, just a few days later on October 11, cryptocurrencies encountered a crisis... The so-called "10/11" flash crash has now become the largest liquidation event in the history of cryptocurrencies.
In this catastrophic crash, major cryptocurrency prices plummeted by double digits, many Altcoin went to near zero, and cryptocurrency exchanges were liquidated (almost every major perpetual contract exchange "automatically reduced" its short positions due to inability to pay).
Despite the seemingly favorable factors that Donald Trump's election brought to the cryptocurrency industry—from the establishment of a strategic Bitcoin reserve to the appointment of regulators who ostensibly support cryptocurrencies—the recent price performance of cryptocurrencies has been objectively poor.
Aside from a brief surge following Trump's presidential victory last November, the ratio of total cryptocurrency market capitalization (TOTAL) to the S&P 500 has remained relatively stable for nearly a year. In fact, since Trump's inauguration on January 20, this ratio has even experienced a surprising negative growth.
As the cryptocurrency market continues to grapple with the unanswered questions surrounding the October liquidation events, more victims are likely to come to light.
This week, Stream Finance—a $200 million actively managed cryptocurrency income fund that offered depositors above-market returns through leverage—declared bankruptcy after “the external fund manager overseeing the Stream fund” lost approximately $93 million in fund assets.
While specific details remain unclear, it appears Stream is likely the first publicly reported victim of a Delta-neutral hedging strategy in the wave of industry-wide "automatic liquidation" (ADL) sweeping the cryptocurrency market. Given Stream's structure, its collapse wasn't entirely unpredictable, but it undoubtedly caught many lenders off guard. They sacrificed security in pursuit of higher returns without any concrete catalyst.
Fears of the next bankruptcy immediately spread throughout the decentralized finance (DeFi) space, causing lenders to flee any high-yield strategies that might face similar risks.
Although the immediate contagion effect of Stream appears to be under control at present, this liquidation event still highlights the risks of the circulating stablecoin mining strategy that is currently prevalent in DeFi. This strategy uses deposit tokens from existing high-risk, high-return strategies to obtain higher returns.
Stream's own disclosure of losses also indicates that any Delta-neutral hedged crypto fund could suffer huge losses due to ADL, which unilaterally canceled the hedging of short positions, rendering spot long positions instantly worthless.
Although the news headlines have moved away from this matter, the October liquidation could have caused catastrophic losses.
Whether done transparently through DeFi or covertly through centralized finance (CeFi), billions of dollars in leveraged funds have been poured into cryptocurrency yield funds, and the market appears to lack sufficient liquidity to liquidate these positions in the event of a potential wave of liquidations in the future.
It remains unclear who the ultimate victims are, but there are certainly people in the cryptocurrency market taking risks with their bare hands. If the market becomes turbulent again, especially with lawsuits surfacing claiming that centralized exchanges were insolvent in the October liquidation, the question isn't whether there will be losses, but whether the entire industry can withstand them.
