The recent turbulence in the crypto world—anchored by the so-called “10/11 crash” and a spate of hacks in decentralized finance (DeFi) protocols—has shaken the courage of many investors. According to Tom Lee, chair of BitMine Inc., the sheer magnitude of the liquidation event on October 11 makes it the largest in crypto history. And though he insists the damage appears contained rather than systemic, he cautions that recovery may take several weeks. (WEEX)
We’ll walk through what happened, how DeFi hacks deepen the problem, and what this all means for market sentiment and spot/derivatives players.
(And yes—this look is written like a person speaking to another person, not a white-paper.)
A Sudden, Sharp Sell-off: The October 10-11 Crash
Over the weekend of October 10-11, 2025, the crypto markets experienced a violent shake-out. According to multiple sources:
- More than US$19 billion in leveraged positions were liquidated across crypto platforms in a 24-hour window. (Investopedia)
- The crash was triggered by macro-news: a surprise announcement by Donald Trump that he would enact 100 % tariffs on Chinese imports, and threats of further export-controls. That announcement sparked a risk-off reaction that rippled through crypto. (Reuters)
- Key cryptocurrencies suffered large drops: for example, Bitcoin (BTC) fell more than 14 % from roughly US$122,500 to near US$104,800. (Reuters)
- The losses weren’t evenly spread: while large-cap coins held up relatively better, many altcoins and DeFi-tokens took deeper hits (40-70 % drops on some). (ChainUp)
- Liquidity dried up—order-book depth dropped sharply in the minutes of the crash, and forced liquidations fed the selling pressure. For example, in one study 70 % of the losses happened in a 40-minute window. (Amberdata Blog)
In short: a macro shock, high leverage, thin liquidity and forced selling all combined to create a textbook “liquidation cascade”.
“Largest Liquidation Event in Crypto History”
Tom Lee’s description of the 10/11 event as the largest in crypto history holds up under scrutiny. Some key data :
- On Oct 11, data from CoinGlass (via Investopedia) and others estimate that over US$19 billion in positions were liquidated. (Investopedia)
- On the platform Hyperliquid alone, more than 1,000 wallets were fully liquidated and 6,300 wallets left deep in the red. (CoinDesk)
- A specialist report from a market-maker (Wintermute Trading) confirmed the liquidation event as “the largest liquidation day in crypto history”. (Bitget)
Lee uses this event to highlight that market confidence can be deeply shaken when leverage meets liquidity stress—even if the underlying fundamentals (blockchain tech, long-term adoption) haven’t collapsed.
The DeFi Protocol Hacks: A Parallel Weak Spot
While the crash grabbed headlines, Lee also pointed to the ongoing vulnerabilities in DeFi protocols as a key erosion of market confidence. He noted that after the 10/11 event, there were “DeFi protocol rug-pull events such as the Balancer Labs hack” that “severely undermined market confidence.” (WEEX)
Why does this matter? A few insights:
- According to the Financial Stability Oversight Council (FSOC) 2022 report, the volume of funds stolen via DeFi hacks has grown significantly and represents a real risk to financial stability—particularly if these hacks affect major platforms. (U.S. Department of the Treasury)
- Hacks feed into a feedback cycle: less confidence → fewer new entrants or capital inflows → thinner liquidity → worse outcomes when stress hits.
- When DeFi protocols are compromised, even indirectly, it raises questions about infrastructure resilience and governance in crypto—something institutional investors pay close attention to.
Lee’s point is that while the crash may not have been caused directly by a DeFi hack, the combination of the liquidation event + ongoing protocol vulnerabilities has created a double-whammy for sentiment.
“Confidence” in This Context
When we talk about “market confidence,” we mean broadly the willingness of participants—retail traders, institutions, funds—to trade, hold, and allocate funds into cryptocurrencies and digital-asset products without expecting a meltdown. Confidence is both structural (governance, risk-control, liquidity) and psychological (sentiment, belief in stability).
Lee’s message: yes, the crash was large and scary, but the good news is that from what he sees, the fallout is contained rather than systemic. Per the interview:
“The good news is that currently there are not many projects showing issues, so it does not seem to be a systemic problem.” (WEEX)
That suggests while damage was done, the foundational plumbing of the major coins/protocols remains intact—and thus there is hope for recovery.
Why Recovery May Take Several Weeks
Lee’s mention of “several weeks” for recovery is realistic—and here are some reasons why it might take time:
- Deleveraging takes time
After a blow-out like this, leveraged positions get liquidated, open interest falls, and risk-taking is reduced. That means fewer buyers stepping in quickly, which slows any bounce. - Sentiment patch-up
Restoring confidence isn’t instantaneous. Some investors will sit on the sidelines until they see clear signs of “normal” order-book behaviour, fewer sudden liquidations, and stable funding rates. - DeFi clean-up
Hacks and protocol failures need to be absorbed, and trust rebuilt. Even if major protocols are fine, weaker ones may continue to cause noise and jitters. - Macro uncertainty remains
The crash was triggered by external macro news (trade-tensions). Until the broader risk-off climate eases, crypto remains exposed. - Focus goes to institutional flows
Institutional capital tends to move slower and demand better signals of stability before full re-commitment. That can delay volume and liquidity recovery.
Lee’s view is cautious but not pessimistic: “limited” rather than “system‐wide” problems—but he isn’t shortcutting the time required for the market’s nerves to calm.
What It Says About the Crypto Ecosystem
Taking a step back, several broader themes emerge from Lee’s commentary and the sequence of events:
A. Risk and Leverage in Crypto Remain Elevated
The 10/11 crash illustrated how quickly leverage plus thin liquidity can blow up a market. As one report put it, open interest fell $36 billion in short order. (Amberdata Blog)
That means risk-management frameworks in crypto (for traders and protocols) are still catching up.
B. Infrastructure and Governance Matter More than Ever
DeFi hacks underscore that it isn’t just price-movements that affect confidence—it’s also whether platforms hold up under stress.
For wider adoption (especially from institutions), the tech, risk-controls and auditability must be credible.
C. Crypto is Not an Island—Macro Events Still Bite
The crash wasn’t just due to crypto-specific issues—it was driven by external shocks (trade-tensions). So, crypto’s correlation with risk-assets and macro geopolitics remains real. This matters for portfolio-construction.
D. Crisis Moments Create Opportunity (But With Caution)
Lee and others note that sharp corrections can clear out excess leverage and create better entry points—but only if one checks the foundations. It’s not “buy indiscriminately” but “buy selectively when the plumbing is solid.”
What to Watch in the Coming Weeks
If you’re tracking how this plays out from here, here are key metrics and developments to monitor (and yes, they reflect what Lee likely has in mind):
- Open interest and funding rates: Are futures funding rates stabilising? Is open interest creeping back?
- Liquidation frequency: Are large forced liquidations still happening? If not, risk is lower.
- Order-book depth & spreads: Are markets showing good depth or are they still thin and volatile?
- Protocol health: Are there new DeFi hacks or protocol failures? Are audits and governance improving?
- Capital flows: Are institutional products showing net inflows? Are retail flows returning?
- Macro risk signals: Are global markets calm or is new external shock risk brewing?
- Sentiment & media tone: Are narratives shifting from “bloodbath” to “opportunity”?
If many of these indicators begin to look positive, then the “limited damage” thesis could prove correct—and the market might gradually regain its footing.
Conclusion
When persons like Tom Lee raise their hand to say, “This was a big deal—but not a death-knell for the industry,” it’s worth listening. The 10/11 crash was a staggering liquidation event—arguably the worst in crypto history. But by coupling that with the headwinds from DeFi protocol hacks, we see the two-prong confidence challenge the market faces: mechanical risk (leverage/liquidity) and operational risk (protocol exploits/governance).
Lee believes the damage is containable—but that doesn’t mean “quick and easy”. Recovery may unfold over the coming weeks, via improved liquidity, cautious re-entry of capital, and fewer shocks. For participants—whether traders, HODLers or watchers—this means exercising care, staying aware of structural risk, and distinguishing between mere price correction and deeper systemic wounds.
The crypto market remains dynamic, high-risk, and high-reward. But as this episode shows, the stakes are rising—and so is the need for disciplined risk awareness.
References
- “Tom Lee: 10/11 Flash Crash and DeFi Protocol Rug Pull Shake Market Confidence, Several Weeks Needed to Digest.” WEEX via BlockBeats, Nov 7 2025. (WEEX)
- “The October 2025 Crypto Crash: A Necessary Deleveraging and Market Reset.” ChainUp Blog, Oct 14 2025. (ChainUp)
- “Here’s What Investors Need to Know About This Weekend’s Massive Crypto Rout.” Investopedia, Oct 14 2025. (Investopedia)
- “Market Maker Wintermute Reviews ‘1011’, the Largest Liquidation Day in Crypto History.” Bitget News, Oct 14 2025. (Bitget)
- “Post-Mortem on the 11 October Flash Crash.” BitMEX Research Blog, Oct 13 2025. (BitMEX Blog)
- “Report on Digital Asset Financial Stability Risks and Regulation.” U.S. Treasury FSOC, Sept 2022. (U.S. Department of the Treasury)
- “How $3.21 B Vanished in 60 Seconds: October 2025 Crypto Crash Explained Through 7 Charts.” Amberdata Blog, Oct 30 2025. (Amberdata Blog)
