When Markets Outrun Machines: The October 10th Lesson in Crypto Infrastructure

One bad news event and the entire crypto market tumbled. Why?

The October 10th crypto crash will be remembered not only for the billions liquidated, but for what it revealed about the state of our infrastructure. This wasn’t just a test of trading strategies or risk management. It was a stress test of the systems that power our markets.

We need to acknowledge scale.

In minutes, established assets - not speculative tokens, but blue chips, collapsed beyond comprehension:

• $ATOM: $4 → $0.001
  
• $SUI: $3.40 → $0.56
  
• $APT: $5 → $0.75
  
• $LINK, $ADA: each down over 70%

These weren’t unknown microcaps. These were assets traded on the largest exchanges in the world. 

In the middle of cascading liquidations, major trading platforms began to show signs of strain. API responses slowed. Price feeds lagged. Spreads grew. Traders reported frozen screens while liquidation engines continued operating in the background.

A Human Cost Hidden Behind Numbers

It’s easy to talk about billions in liquidations as if they’re just numbers on a chart. But behind those numbers are individuals who lost everything - people who had conviction, who didn’t expect data delivery to break at the worst possible moment.

For some, it wasn’t just capital that vanished, but confidence - in markets, in platforms, in the idea that they ever had a fair chance. Markets are meant to test conviction, not connectivity.

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A Trigger - But Not the Full Story

Some have framed this crash as the result of a political shock. A tariff announcement. A macro headline. But that only explains the first move - not the cascade that followed.

As one observer put it:

“This wasn’t just risk-off behavior. This was structural breakdown. $6B liquidated in the first hour. That’s not a selloff. That’s a feedback loop.”

Market Microstructure Failures - Wrapped Assets, Real Damage

One of the most revealing failures came from wrapped assets like wBETH. In theory, these tokens represent staked ETH, like a claim check. But as infrastructure buckled: wBETH crashed from ~ $3,800 parity to $430

Not because ETH lost value, but because spot markets went illiquid. 

Margin systems marked collateral down based on panicked spot trades, not underlying reality

The result?

Solvent traders were liquidated as if they held worthless collateral. Liquidation engines continued operating - but the data they relied on no longer reflected truth.
The same occurred with USDe, a synthetic dollar fully redeemable at par throughout the crisis. Yet exchanges marked it at $0.65 based on thin spot markets. Protocol was solvent. Traders were not.

‍Where Were the Market Makers?

Some asked, “Why didn’t market makers step in?” The answer is - they couldn’t.

When the largest venues freeze or throttle API access, liquidity providers disengage. They can’t hedge. They can’t verify prices. Providing bids becomes reckless. The result was a “liquidity vacuum” - the very actors who stabilize order books were structurally unable to intervene.

When Infrastructure Becomes the Risk

Crypto markets now move faster than ever. Liquidation engines run in milliseconds, but infrastructure still depends on rate-limited APIs, congestion-prone endpoints, and centralized data chokepoints. During the crash, platforms throttled APIs - traders were left unable to adjust positions or close trades.

This is the gap we must acknowledge: Our systems are built for normal days. Crashes are anything but normal.

DeFi Passed the Test - Quietly

Amid the chaos, decentralized exchanges and on-chain protocols absorbed record volume. No downtime. No halts. Transactions cleared. DeFi was far from perfect, but it honored one core promise: if the market moves, you see it move. There were no hidden throttles. 

Leverage Will Only Grow - Infrastructure Must Grow Faster

It’s easy to dismiss this crash as a one-off event. It isn’t. The next cycle will feature more algorithmic trading, faster liquidation engines, and deeper leverage - not less. Yet much of our infrastructure still operates on legacy assumptions.

We cannot tell users to “trade responsibly” if we don’t build systems that operate reliably. Market risk is accepted. Technical risk is not.

Every exchange, builder, and infrastructure provider now faces the same question: can your systems survive the next crash without compounding the damage?

This isn’t about pointing fingers. Markets will always be unpredictable. Outages happen. But user trust is earned through preparation. Fail-safes. Redundant data gateways. 

If we want a financial system that can compete with the old one, we need to hold ourselves to higher standards. Not only in uptime and speed, but in operational integrity. Real-time data cannot freeze when it matters most. The next cycle move will come with another stress test. Whether we pass or fail won’t depend on prices. It will depend on the infrastructure we build today.

‍Reflections based on market observations, exchange communications, and public data. These views are independent opinions of Tatum employees, not on behalf of any entity.