Tom Lee: The Current Crypto Crash Signals Forced Sellers After October 10 Shock
- What Really Happened on October 10?
- Why Market Makers Matter More Than You Think
- The Liquidity Squeeze Playbook
- Short-Term Pain vs Long-Term Gain
- FAQ: Understanding the Crypto Liquidity Crunch
The crypto market has been struggling to regain momentum since the brutal October 10 crash, with daily sell-offs becoming the norm in U.S. trading sessions. According to Tom Lee, President of BitMine and co-founder of Fundstrat, this isn't just typical market volatility - we're seeing clear signs of forced selling from market makers who got caught in the October liquidity squeeze. While painful in the short term, Lee believes this purge could set the stage for a healthier market structure moving forward.
What Really Happened on October 10?
That fateful Tuesday saw nearly $20 billion liquidated from crypto markets in mere hours. "Market makers got absolutely blindsided," Lee explained during his CNBC interview. "When these liquidity providers take hits to their balance sheets, they have no choice but to pull back - reducing order book depth, widening spreads, and creating a vicious cycle of forced selling."
Why Market Makers Matter More Than You Think
Lee compares market makers to the "central banks of crypto" - they absorb temporary shocks and facilitate asset rotations. When they retreat, the entire market operates in degraded mode. The numbers speak for themselves: Bitcoin plunged from ~$121,000 pre-crash to $87,000 afterward with no meaningful recovery, while ethereum and altcoins followed suit.
"This isn't fundamentally different from what we saw in 2022," notes Lee. "We're going through the same type of deleveraging process - painful but necessary." Data from TradingView shows order book depth across major exchanges like BTCC remains 40-60% below pre-October levels.
The Liquidity Squeeze Playbook
Weakened balance sheets force market makers to:
- Reduce leverage exposure
- Shrink order book sizes
- Withdraw liquidity from peripheral pairs
This creates a crypto version of quantitative tightening - amplifying every sell order and making books vulnerable to speculative attacks. "It's the perfect recipe for volatility," Lee observes, "and unfortunately, we're seeing sharks circle to trigger liquidation cascades."
Short-Term Pain vs Long-Term Gain
While acknowledging current challenges, Lee remains bullish long-term:
| Short-Term (1-3 months) | Long-Term (12+ months) |
|---|---|
| Continued volatility | Healthier leverage ratios |
| Liquidity constraints | Recapitalized market makers |
| Forced selling pressure | Potential new bull cycle |
His thesis? This purge could ultimately strengthen market infrastructure. "In my experience, these resets create better foundations for the next rally," Lee shares, while maintaining his "supercycle" outlook for Ethereum especially.
FAQ: Understanding the Crypto Liquidity Crunch
What caused the October 10 crypto crash?
The October 10 crash was triggered by a perfect storm of overleveraged positions, sudden liquidations, and market makers getting caught off guard - resulting in $20 billion wiped from crypto markets within hours according to CoinMarketCap data.
How long will this liquidity crisis last?
Historically, similar liquidity crunches (like in 2022) lasted 2-4 months. Current indicators suggest we're about halfway through the deleveraging process as of November 2025.
Is this different from regular crypto volatility?
Absolutely. Normal volatility occurs within functional markets. What we're seeing now is structural - like a engine running on half its cylinders due to impaired market makers.
Should investors be buying this dip?
This article does not constitute investment advice. That said, Lee emphasizes focusing on long-term fundamentals rather than timing short-term bottoms.
