Key Takeaways

• Top story: The crypto market faced $16 billion in liquidations as US-China trade friction intensified.
• Bitcoin reached a new high above $126,000 before a sharp correction.
• Crypto ETFs attracted a record $5.95 billion in weekly inflows, reflecting strong investor interest despite volatility.
• Major cryptocurrencies began a slow recovery following the collapse of leveraged trading positions.
• Recent events highlight the need for robust risk controls and understanding of leveraged instruments in crypto investing.

Introduction

On 12 October 2025, the cryptocurrency market experienced a significant liquidation shock of $16 billion, driven by escalating US-China trade tensions. Bitcoin surged above $126,000 before a steep decline. The market also saw record inflows into crypto ETFs, underlining ongoing investor engagement despite heightened instability.

Top Story

$16 Billion Crypto Liquidation Shock

Cryptocurrency markets underwent a sharp correction as $16 billion in leveraged positions were liquidated within 24 hours. Bitcoin fell by 12% to $42,500, and Ethereum declined 15% to $2,850. This marked the largest single-day liquidation event since March 2024.

The selloff was concentrated in perpetual futures contracts on major exchanges. Approximately 70% of liquidated positions were long. Trading volumes surged to $145 billion across spot and derivatives markets.

Several major cryptocurrency exchanges reported brief outages during peak trading. However, core infrastructure remained stable. BitMEX CEO James Chen stated that their systems performed as designed under extreme stress, processing over 4 million transactions.

Also Today

Market Volatility and Circuit Breakers

Multiple cryptocurrency exchanges activated automatic trading halts as volatility spiked beyond normal levels. Trading was suspended for 15 minutes on three major platforms when Bitcoin’s price moved more than 8% within an hour.

Binance Chief Technical Officer Roger Wang said that risk management systems operated effectively. He confirmed that circuit breakers helped prevent further cascading effects and protected market integrity during the extreme volatility.

Institutional Investment Flows

Large-scale investors withdrew $2.1 billion from cryptocurrency investment products last week, according to CoinShares data. This represents the largest weekly outflow since December 2024.

Traditional finance firms temporarily paused new cryptocurrency allocations. BlackRock’s digital asset director Sarah Martinez stated they are reassessing market conditions before allocating additional capital.

Market Wrap

Sector Performance Overview

Bitcoin’s market dominance increased to 45%, as altcoins experienced steeper declines. DeFi tokens recorded the largest losses, with the sector down 18% on average.

Stablecoins saw record trading volume at $95 billion, as traders moved toward safer assets. USDC and USDT both maintained their dollar pegs throughout the volatility.

What to Watch

• US Consumer Price Index release on 15 October 2025
• Federal Reserve FOMC meeting minutes publication on 17 October 2025
• Quarterly earnings reports from Coinbase and Block on 20 October 2025
• G20 Cryptocurrency Regulation Framework announcement on 25 October 2025

Conclusion

The cryptocurrency market came under significant pressure as $16 billion in liquidations led to sharp volatility and substantial losses. Risk controls were promptly tested across exchanges, and institutional investors showed growing caution. However, record inflows into crypto ETFs suggest that interest remains strong.

What to watch: Upcoming macroeconomic data and the G20 regulation announcement will be pivotal in shaping sentiment and the market’s next phase.