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October Crypto Crash Wipes Out 30% of Market Makers
Galaxy Digital CEO Mike Novogratz highlighted that the October 10th crypto crash was significant, eliminating about a third of market makers in some parts of the ecosystem. This event severely impacted market liquidity and retail capital.
- The crash originated from a price misfunction on Binance's oracle affecting synthetic stablecoins, triggering a cascade of liquidations across levered perpetual markets like Hyperliquid and Uniswap.
- Crypto investors often use high leverage, seeking substantial returns, which exacerbates market volatility and risks during technical glitches.
- Perpetual futures present additional risks for liquidity providers due to their design, where liquidations can affect both long and short positions simultaneously.
Novogratz noted a sharp reduction in liquidity and retail participation post-crash, with significant pain points at $80,000 and specific altcoin levels. Despite a bounce driven by Federal Reserve actions, he warned that the market's psychology remains damaged.
- Massive profit-taking by early Bitcoin holders has met ETF-driven inflows, creating short-term pain but potential long-term health for the market.
- There is a shift towards evaluating crypto as a real business ecosystem rather than speculative hype, focusing on actual utility and profitability.
Despite structural challenges, Novogratz believes that macroeconomic conditions, including anticipated rate cuts and increased liquidity, might favor crypto recovery. At the time of reporting, Bitcoin traded at $91,115.
