Oct 13, 2025
By Proper Asset Management
The massive market selloff on Friday spawned quite a few theories and speculations, and in this essay, we will first look at the big picture and then go a bit deeper into the details.
On Friday morning U.S. time, President Trump made a sharp statement regarding China, promising serious financial actions in response to Beijing’s restrictive economic policy and even canceling a planned high-level meeting with President Xi at the APEC summit.
The equity market received this news very negatively, and an intense selloff started immediately. As is well known, when the U.S. equity market falls, a risk-off regime switches on across major asset classes, and accordingly, the crypto market went down as well, though not very much - roughly within 5% for major tokens such as bitcoin and ether. In principle, against the backdrop of a 2% decline in the SPX, one could say crypto was holding up quite well. Volatility was higher last spring.
However, already after the U.S. equity market had closed, President Trump made a more concrete statement about additional (over and above existing) tariffs on Chinese imports of 100%, which brought the overall tariff level to 130%, and he also announced a serious restriction on software exports to China.
An important point is that these words were spoken precisely after the close of the regular U.S. trading session. Unlike other presidents, Trump very often takes aggressive actions at such times to reduce the influence of fundamental factors on the market and avoid triggering a collapse. Recall that during the tariff wars at the beginning of 2025, Trump preferred to make announcements on Saturday, and by Monday (and on Monday before the regular session opened), a new, softer statement would follow. So this time as well, over the course of the weekend, we saw a significant softening of rhetoric and, as a result, a good open for U.S. futures in the extended Globex session.
Nevertheless, as far as the crypto market is concerned, Friday evening evoked the name of a U.S. military doctrine from the Gulf War era - “Shock and Awe.”
What exactly happened?
Even though the regular U.S. session was already closed, futures were trading in the last minutes of the extended session - and they plunged sharply. Large players immediately began closing positions in spot. The heavily overheated futures market, not only in bitcoin and ether but also in numerous altcoins (since this year, exchanges started listing anything and everything in the futures section) responded with massive liquidations, which in turn triggered additional liquidations because closing long positions is selling. This situation is called a cascade. At a certain moment, arbitrage bots joined the fray, started aggressively shorting, and for a minute, there was simply not enough liquidity in the order book because market makers had sold all their tokens and then simply switched off.
A well-known coin like ATOM (the base token of the Cosmos ecosystem), for instance, traded at $0.00001 on Binance, and overall, many fairly strong tokens fell 80-90%. Of course, it was almost impossible to catch such prices because with an empty order book, a $500-$1,000 buy was enough to snap the price back, and then market makers switched back on.
It might seem like a carbon copy of what happened in May 2021, when the peak of the bull cycle ended with bitcoin falling 40% in a matter of days, but in fact, it is different.
First, institutional adoption, as well as retail participation, has lifted crypto’s market capitalization to a very high level, and the immediate losses of market participants, both institutional and individual, amounted to a colossal sum (from $20 to $40 billion by various estimates).
Second, it was precisely the proliferation of futures, which allows opening large positions with tiny margin, that led to the cascade of liquidations.
As a result, if someone was in a position, at a minimum they took a stop, and at a maximum they suffered a leveraged liquidation. Of course, the situation did not affect pure spot holders who do not place stops, but most crypto market participants do not fall into that category. Large trading volumes are by no means generated by spot holders.
By the way, the Trump family’s company WLFI offloaded part of its assets and a large amount of its own tokens immediately before the president’s first statement. In principle, that is not surprising.
What follows is far more intriguing.
At roughly the same time as the first presidential statement was published, some new wallets on the Hyperliquid exchange opened a massive short position of $1.1 billion with 10x leverage. One might say this was simply the work of someone close to the president’s circle of friends or family. Insider trading, plain and simple, but...
On Binance, collateral for futures positions can be provided, among other things, in the USDe token, which is issued by the Ethena project. USDe is a stablecoin; however, specifically on Binance, this stablecoin is valued not via oracles or Ethena’s own protocol price but based on Binance’s own spot quotes. In general, such a practice is quite controversial, as it leads to depegs in the case of stables and serious discrepancies in quotes when compared across trading venues. Binance was supposed to switch to oracle-based valuation on October 14.
And then, in the period between the president’s first and second statements, a targeted attack was carried out on the USDe stablecoin by selling roughly $60 million USDe on Binance spot (equivalent to a similar amount in dollars). The attack caused the USDe price on Binance to drop from $1 to $0.65 and triggered forced liquidations in bitcoin, ether, and other tokens directly on Binance in the amount of $900 million.
At that very moment, Trump’s second statement about a 100% tariff on China came out. Having produced a billion in liquidations on a single venue, the futures-overheated market then fell in the manner we described in the previous part of this essay. There is a very high probability that without the initial impulse, which cost its initiator $40-$60 million, the crypto market would not have crashed, and no flash crash would have occurred. It was precisely this blow that set off the cascading situation, which evolved into a de facto halt of trading on all exchanges.
Figuratively speaking, a hollow order book, and literally most exchanges simply failed to execute client orders, either buys or sells. In metaphorical terms, the attack on USDe was the fuse; the president’s second statement - the boom.
Who spent that kind of money and why, and was it driven purely by hatred of humanity?
The party that opened the $1.1 billion short on Hyperliquid on Friday afternoon locked in a profit of $192 million after the wave of liquidations. The meticulous planning of the attack on USDe and the perfect timing with respect to the fundamental backdrop leads one to conclude that the risk of loss or of the plan failing to work was entirely absent. Impeccable work.
As for who is behind this operation, there are countless guesses. And of course, in the family, there is the classic autistic wunderkind, Barron, who, at 19, together with a well-known influencer, ran a token listing that ended in a rug pull. But that is just an aside we recalled.
What probably concerns everyone is how we traded this Friday - whether we made any money or lost, and whether it was difficult.
We got a stop within normal working limits after Trump’s first statement, and seeing that the sell pressure was continuing, we did not open new positions and hedged existing ones.
That is boring and not at all exciting, so we prepared the essay you have just read to delight you with engaging content.