The statement that "crypto didn’t break — market makers did" as explained by Tom Lee reflects the major factors behind the crypto market downturn that began on October 10, 2025. According to Tom Lee, chairman of BitMine and a well-known crypto strategist, a massive liquidation event was triggered by a stablecoin mispricing on one exchange. The stablecoin briefly dropped from its $1 peg to around 65 cents due to thin liquidity and a pricing error in the exchange’s internal price feed system. This caused an automatic deleveraging (ADL) cascade across multiple exchanges, wiping out nearly 2 million leveraged trading accounts in minutes.
This historic liquidation hit market makers severely, leaving them short on capital and forcing them to shrink their balance sheets and reduce liquidity provision. Market makers, who provide essential liquidity to crypto order books, were crippled by this shock, causing a structural liquidity crunch and widening spreads across assets like Bitcoin and Ethereum.
The aftermath is a prolonged period of thin liquidity that amplifies volatility — making every market dip feel worse. This is not a fresh bear market but rather a lagging unwind of the massive October liquidation event, comparable to a similar eight-week cycle that happened on May 2, 2022. Liquidity providers are still repairing balance sheets, which suppresses market-making activity and increases trading friction.
In that previous 2022 incident, it took approximately eight weeks for market makers to fully recover and restore normal liquidity levels in the crypto markets. We are 7 weeks into this event which started on Oct 10, 2025.
In summary, the current correction in bitcoin was less about fundamental crypto breakdown, though exacerbated by rate cut concerns, but more about the internal mechanics of leveraged market makers being hit hard by a software glitch-triggered liquidation cascade. Developers are working on fixes to prevent repeat triggers of ADL-related cascades, and the market is likely to remain volatile until liquidity providers fully recover.Numerous metrics have suggested bitcoin is very close to putting in a major floor as has been discussed in prior reports. But we still have possibly one more week of liquidity issues so keep a close eye for entry points such as any pocket pivots, U&R patterns, or volume dry-ups that may form once the price nosedive stabilizes in related high alpha instruments such as ESTU, MSTU, ETHE, MSTR, and GBTC. That said, never argue with the markets. The downtrend could persist for longer than expected despite the metrics and despite history. Further weakness in stocks could also spur more selling. Always keep stops tight if you decide to try your hand.