Frank Holmes: Why the 10/10 Crypto Crash Still Haunts Bitcoin

“Bitcoin is the black hole against reckless monetary policy.”

— Max Keiser

 

February 17, 2026 —  Four months ago, digital assets underwent what I believe was the most consequential liquidation event in their history. 

On October 10, 2025, over $19 billion in leveraged positions were wiped out within hours. Bitcoin plummeted from roughly $122,000 to $105,000. More than 1.6 million trader accounts were liquidated.

The 10/10 crypto crash, as it’s sometimes called, did more than just rattle the market. It fundamentally altered the psychological landscape of crypto investing.

As I told PreMarket Prep last week, from a technical standpoint, Bitcoin is now roughly two standard deviations below its 20-day trading norm. This is a level we’ve seen only three times in the past five years. Historically, such extremes have favored short-term bounces over the subsequent 20 trading days.

The Japanese carry trade unwind—estimated at around $500 billion—likely exacerbated the weakness we saw in January and this month, but I believe that pressure is largely behind us now.

Now, with Bitcoin still trading under $70,000—down 45% from its all-time high—some investors might be wondering if October 10 is the reason this weakness has persisted.

The short answer is yes. But the full story is more nuanced and, I think, more important for your portfolio decisions going forward. 

What Actually Happened

To put things in perspective, the 10/10 crash was larger than the FTX meltdown in absolute dollar terms. Think about that. It dwarfed the collapse of what was then the second-largest crypto exchange. Binance alone had to tap its insurance fund for $188 million to cover bad debt. Several other exchanges faced similar pressures.

The immediate trigger? Many believe it was President Donald Trump’s announcement of a 100% tariff on Chinese imports, stacked on top of the existing 30% tariff.  

That geopolitical shock spooked markets broadly, but crypto’s highly leveraged structure turned what should have been a correction into a full-blown massacre. 

The crash exposed fundamental structural weaknesses in how exchanges were managing risk, and one platform in particular might bear significant responsibility.

The Binance Factor

Star Xu, the founder and CEO of OKX, recently took to X with a detailed explanation of how he understands the 10/10 event unfolded.

According to Xu, Binance launched an aggressive user-acquisition campaign offering 12% annual percentage yield (APY) on USDe, a synthetic dollar on the Ethereum network. At the same time, Binance was allowing USDe to be used as collateral with the same treatment as established stablecoins like USDT and USDC.

What Binance created, Xu says, was a dangerous incentive structure. Users were encouraged to convert USDT and USDC into USDe to earn attractive yields, not realizing it was a much riskier asset.

Then came the leverage loop. Sophisticated users figured out they could covert USDT into USDe, use that USDe as collateral to borrow more USDT and convert that borrowed USDT back into USDe. Wash, rinse, repeat. According to Xu, APYs artificially rose as high as 24%, 36% and even 70%+. 

When volatility hit, USDe depegged quickly, and cascading liquidations followed. The sell-off triggered a classic doom loop where forced selling led to more margin calls, which led to more forced selling.

To be fair, Binance claims no responsibility for the crash. Speaking at a crypto event last week, the firm’s co-CEO, Richard Teng, placed the blame solely at Trump’s feet. All I know is that when you allow highly leveraged contracts in an environment where stop-losses can be exploited and risk controls are inadequate, you’re building a powder keg. All it takes is a spark.

The Psychological Damage

October 10 wiped out more than just positions. It wiped out confidence. The event marked the top of Bitcoin’s move near $126,000 and triggered fear among investors that we’re still working through today.

We saw significant ETF redemptions in the weeks that followed. Retail investors who had piled into futures and margin loans as Bitcoin hit all-time highs earlier that week were the first casualties. Over 1.6 million individual accounts were liquidated, a vast number of them small players.

The subsequent sell-off this month, which delivered Bitcoin’s largest realized loss in history as prices fell from $70,000 to $60,000, was characterized by one analyst as a “textbook capitulation event.” It occurred rapidly, on heavy volume, and crystallized losses from the lowest-conviction holders.

Why I Remain Bullish

Despite the ongoing market jitters, I remain bullish in the long term because the fundamentals still look strong.

Institutional adoption has accelerated. Corporate Bitcoin treasuries—what we call Digital Asset Treasury (DAT) companies—now hold more than 1.1 million BTC, representing 5.7% of total supply and valued at roughly $90 billion. Strategy (formerly MicroStrategy) alone has built a position amounting to 3.5% of total Bitcoin supply. In January, institutions added approximately 43,000 Bitcoin to their portfolios despite the challenging price environment. 

The U.S. Strategic Bitcoin Reserve now holds over 325,000 BTC, the most in the world at 1.6% of total supply. Nation-states are accumulating, as they are with gold. Major corporations are accumulating.

The Bottom Line

I’ve often called Bitcoin “digital gold,” but I don’t think it’s fully matured yet as a true safe-haven asset. Institutions still treat it as risk-on, not risk-off. That tells me it’s still finding its role in institutional portfolios.

Was October 10 the reason Bitcoin’s weakness has persisted? I believe yes. The crash was a major structural shock that wiped out leveraged positions and forced necessary, but painful, deleveraging across the digital asset ecosystem.

Did irresponsible marketing campaigns by certain platforms contribute to the crash? Again, I believe yes. When you incentivize users to treat a tokenized hedge fund like a stablecoin and then allow unlimited leverage on top of that, risk is amplified.

As massive as the crash was, it may have been necessary medicine. Sometimes excess leverage needs to be flushed from the system before the next move higher can begin. I believe we’re in the last stages of that process. 

 

Regards,

Frank Holmes

 

U.S. Global Investors & Grey Swan Investment Fraternity