Bitwise CIO: October 10 Crypto Plunge a Stress Test, No Lasting Damage

In an October 14 memo, Bitwise Chief Investment Officer Matt Hougan described the October 10 crypto sell-off as a stress test rather than a regime shift, noting that roughly $20 billion in leveraged positions were liquidated but core infrastructure and major firms remained intact.

Hougan traced the volatility to a late-Friday post from President Trump threatening 100% tariffs on Chinese goods. With equities markets closed, traders reportedly funneled their reactions into the always-open crypto market. As prices fell, liquidations of highly leveraged positions sequentially intensified the sell-off. Bitcoin dropped as much as 15% before rebounding near $115,000 by Monday, while some altcoins experienced sharper swings—Solana (SOL) briefly fell about 40% intraday.

Assessing the aftermath, Hougan found no systemic failures. Channel checks with custodians and liquidity providers showed losses but no collapses among major players, including hedge funds and prominent market makers—a factor he credited for the market’s rapid recovery.

He also reviewed crypto’s infrastructure. Decentralized platforms such as Uniswap, Hyperliquid, and Aave reportedly operated normally, while a few centralized exchanges faced challenges; Binance, for example, refunded nearly $400 million to affected traders. According to Hougan, these outcomes suggest crypto’s plumbing performed at least on par with, if not better than, traditional markets under similar stress.

Investor behavior provided further reassurance. Hougan noted institutional clients largely remained on the sidelines, and his inbox remained unusually quiet. The relative calm likely reduced the risk of cascading liquidations and helped the market reset once policy tensions eased.

Given that no security breaches occurred, core technology remained stable, and regulatory conditions were unchanged, Hougan concluded that the episode does not alter crypto’s long-term trajectory. He highlighted enduring structural drivers: clearer regulatory frameworks, increasing institutional adoption, stablecoins’ expanding role in payments, and growing tokenization of traditional assets.

Year-to-date, bitcoin has gained 21%, while the Bitwise 10 Large Cap Crypto Index has risen 22%. In the near term, Hougan expects thinner liquidity as market makers recalibrate—a factor that may amplify short-term price swings—before the focus returns to fundamentals.