Merely four days after Bitcoin hit a new all-time high, the crypto market experienced an unprecedented "10/10 Flash Crash." Major cryptocurrencies plummeted by double-digit percentages, numerous altcoins went to zero, several exchanges teetered on the brink of bankruptcy, and automatic deleveraging mechanisms were triggered. Although Trump's election victory was seen as a positive for the industry, crypto asset prices remained depressed, and the ratio of the total crypto market cap to the S&P 500 turned negative. Subsequently, the implosion of highly leveraged yield funds like Stream Finance exposed the fragility of "delta-neutral" strategies, spreading panic throughout the DeFi ecosystem and causing a collective investor retreat from high-risk yield strategies. These events revealed the risks of excessive leverage and insufficient liquidity in the crypto market. Market sentiment pivoted sharply from optimism, leaving the industry facing a crisis of confidence and a potential wave of liquidations.

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Summary

Editors' Note: Just four days after Bitcoin set a new historical high, the crypto market was hit by an unprecedented "10/10 Flash Crash." Not only did major cryptocurrencies crash, and numerous altcoins zero out, but exchanges also faced a liquidation crisis. Simultaneously, the implosion of highly leveraged yield funds like Stream Finance exposed the fragile nature of the "trust-me-bro" style bubble. Optimism on social platforms rapidly turned to panic, severely damaging market confidence.

This article reviews the sequence of these events, attempting to answer a key question: Why has crypto market sentiment suddenly turned so bearish? Amidst the intertwining bubble burst and trust crisis, we might be standing at a new cyclical inflection point.

The following is the original text:

On Monday, October 6, 2025, Bitcoin reached a new all-time high, breaking through the $126,000 mark for the first time. From the trenches of Crypto Twitter to the newsrooms of CNBC, holders were immersed in a pervasive "fog of hope."

Although the fundamentals have changed little in the month since, just four days later, on October 10, the crypto market faced a crisis—the "10/10 Flash Crash" is now considered the largest liquidation event in crypto history.

During this disastrous plunge, major cryptocurrencies fell by double-digit percentages, many altcoins went straight to zero, and several exchanges neared insolvency (almost all major perpetual futures platforms triggered automatic deleveraging mechanisms due to an inability to cover profits for short positions).

Despite Trump's election victory being viewed as a positive for the crypto industry—from plans to establish a strategic Bitcoin reserve to appointing seemingly pro-crypto regulatory officials—crypto asset prices have remained sluggish.

Aside from a brief rally following Trump's initial election last November, the ratio of the total crypto market capitalization (TOTAL) to the S&P 500 has been flat for nearly a year. In fact, since Trump's formal inauguration on January 20, this ratio has shown a surprising negative trend.

As the market continues to digest the aftermath of the 10/10 liquidations, more problems are beginning to surface.

Just this past Monday, Stream Finance declared insolvency. It was a $200 million "trust-me-bro" style crypto yield fund that used leverage to provide depositors with above-market returns. Its "external fund manager" lost approximately $93 million in assets during operations.

While details are not yet fully disclosed, Stream is likely the first publicly known "delta-neutral" strategy fund to implode due to the 10/10 automatic deleveraging. Although its structure had long raised questions, its collapse still caught many lenders off guard—they had chosen to sacrifice safety for higher returns in the absence of clear risk signals.

Following Stream's implosion, panic quickly spread throughout the DeFi ecosystem, prompting investors to collectively flee similar high-risk yield strategies.

Although, for now, the ripple effects from Stream haven't fully propagated, this event exposed the risks of the increasingly popular "recursive stablecoin farming" strategy in DeFi—using deposit certificates from already risky strategies to take on further leverage for higher yields.

Stream's disclosed losses also reveal the potential massive damage delta-neutral funds could have suffered during the 10/10 deleveraging: short hedges were forcibly removed by the system, while spot long positions instantly went to zero.

Even though headlines have moved on, it's certain that the losses on October 10 were catastrophic.

Whether operating openly in DeFi or covertly in CeFi, there are billions of dollars in leverage within crypto yield funds. Whether the market has sufficient liquidity to handle a potential future wave of liquidations remains unknown.

It's currently unclear who is "swimming naked," but it's certain that someone in the crypto casino has lost their trunks. If the market declines again, especially amidst lawsuits alleging major exchanges were insolvent during the 10/10 liquidations, the question is no longer "if something will happen," but "can the entire industry withstand it?"

Merely four days after Bitcoin hit a new all-time high, the crypto market experienced an unprecedented "10/10 Flash Crash." Major cryptocurrencies plummeted by double-digit percentages, numerous altcoins went to zero, several exchanges teetered on the brink of bankruptcy, and automatic deleveraging mechanisms were triggered. Although Trump's election victory was seen as a positive for the industry, crypto asset prices remained depressed, and the ratio of the total crypto market cap to the S&P 500 turned negative. Subsequently, the implosion of highly leveraged yield funds like Stream Finance exposed the fragility of "delta-neutral" strategies, spreading panic throughout the DeFi ecosystem and causing a collective investor retreat from high-risk yield strategies. These events revealed the risks of excessive leverage and insufficient liquidity in the crypto market. Market sentiment pivoted sharply from optimism, leaving the industry facing a crisis of confidence and a potential wave of liquidations.

---

Summary

Editors' Note: Just four days after Bitcoin set a new historical high, the crypto market was hit by an unprecedented "10/10 Flash Crash." Not only did major cryptocurrencies crash, and numerous altcoins zero out, but exchanges also faced a liquidation crisis. Simultaneously, the implosion of highly leveraged yield funds like Stream Finance exposed the fragile nature of the "trust-me-bro" style bubble. Optimism on social platforms rapidly turned to panic, severely damaging market confidence.

This article reviews the sequence of these events, attempting to answer a key question: Why has crypto market sentiment suddenly turned so bearish? Amidst the intertwining bubble burst and trust crisis, we might be standing at a new cyclical inflection point.

The following is the original text:

On Monday, October 6, 2025, Bitcoin reached a new all-time high, breaking through the $126,000 mark for the first time. From the trenches of Crypto Twitter to the newsrooms of CNBC, holders were immersed in a pervasive "fog of hope."

Although the fundamentals have changed little in the month since, just four days later, on October 10, the crypto market faced a crisis—the "10/10 Flash Crash" is now considered the largest liquidation event in crypto history.

During this disastrous plunge, major cryptocurrencies fell by double-digit percentages, many altcoins went straight to zero, and several exchanges neared insolvency (almost all major perpetual futures platforms triggered automatic deleveraging mechanisms due to an inability to cover profits for short positions).

Despite Trump's election victory being viewed as a positive for the crypto industry—from plans to establish a strategic Bitcoin reserve to appointing seemingly pro-crypto regulatory officials—crypto asset prices have remained sluggish.

Aside from a brief rally following Trump's initial election last November, the ratio of the total crypto market capitalization (TOTAL) to the S&P 500 has been flat for nearly a year. In fact, since Trump's formal inauguration on January 20, this ratio has shown a surprising negative trend.

As the market continues to digest the aftermath of the 10/10 liquidations, more problems are beginning to surface.

Just this past Monday, Stream Finance declared insolvency. It was a $200 million "trust-me-bro" style crypto yield fund that used leverage to provide depositors with above-market returns. Its "external fund manager" lost approximately $93 million in assets during operations.

While details are not yet fully disclosed, Stream is likely the first publicly known "delta-neutral" strategy fund to implode due to the 10/10 automatic deleveraging. Although its structure had long raised questions, its collapse still caught many lenders off guard—they had chosen to sacrifice safety for higher returns in the absence of clear risk signals.

Following Stream's implosion, panic quickly spread throughout the DeFi ecosystem, prompting investors to collectively flee similar high-risk yield strategies.

Although, for now, the ripple effects from Stream haven't fully propagated, this event exposed the risks of the increasingly popular "recursive stablecoin farming" strategy in DeFi—using deposit certificates from already risky strategies to take on further leverage for higher yields.

Stream's disclosed losses also reveal the potential massive damage delta-neutral funds could have suffered during the 10/10 deleveraging: short hedges were forcibly removed by the system, while spot long positions instantly went to zero.

Even though headlines have moved on, it's certain that the losses on October 10 were catastrophic.

Whether operating openly in DeFi or covertly in CeFi, there are billions of dollars in leverage within crypto yield funds. Whether the market has sufficient liquidity to handle a potential future wave of liquidations remains unknown.

It's currently unclear who is "swimming naked," but it's certain that someone in the crypto casino has lost their trunks. If the market declines again, especially amidst lawsuits alleging major exchanges were insolvent during the 10/10 liquidations, the question is no longer "if something will happen," but "can the entire industry withstand it?"