Huobi Growth Academy | Macro Research Report on the Crypto Market: TACO Trading and Macroeconomic Analysis and Market Outlook After the 1011 Crash

I. Event Background and Analysis

The market turmoil on October 11, 2025, has been dubbed the "1011 Incident" by industry insiders. This extreme market event, which saw over $19 billion in liquidations in a single day and Bitcoin plummeting by $15,000 at one point, is not an isolated incident but rather the result of a combination of macro-political factors, structural market vulnerabilities, and localized triggering mechanisms. Its complexity and destructiveness evoke memories of the Lehman moment during the 2008 global financial crisis. Below, we will outline the deeper logic of this crisis from several aspects: macro background, market vulnerabilities, triggering mechanisms, transmission chains, and clearing mechanisms.

Global Macro: Trump's Tariff Policy and Sino-U.S. Trade Conflict. In the second half of 2025, the global economy was already under high pressure. After several rounds of interest rate hikes and deficit expansion, the sustainability of U.S. fiscal policy was called into question, with the dollar index remaining high and global liquidity tightening. Against this backdrop, late on October 10 (Eastern Time), Trump suddenly announced a 100% tariff on all imports from China, far exceeding market expectations and escalating the Sino-U.S. trade conflict from "structural friction" to "full economic confrontation." This policy instantly shattered market illusions of "Sino-U.S. easing." The Asia-Pacific stock markets were the first to feel the pressure, and U.S. stock futures plummeted before the market opened. More importantly, the pricing logic of global risk assets was completely disrupted. For crypto assets, which heavily rely on dollar liquidity and risk appetite, this was undoubtedly a systemic shock. It can be said that the macro level provided the "black swan" external shock, becoming the initial trigger for the 1011 incident. Additionally, there were market vulnerabilities: liquidity tightening, excessive leverage, and emotional exhaustion. However, whether any external shock can evolve into a crisis also depends on the market's own vulnerabilities.

The crypto market in 2025 was in a delicate phase: first, liquidity was tight due to the Federal Reserve's balance sheet reduction and high interest rate environment, leading to a shortage of dollar funds. The issuance of stablecoins slowed, arbitrage channels both inside and outside the market were blocked, and the depth of on-chain liquidity pools significantly decreased. Secondly, there was excessive leverage; with BTC breaking the $100,000 mark and ETH returning to a market cap of over $1 trillion, market sentiment was extremely exuberant, and the scale of perpetual contract positions hit new highs, with overall leverage surpassing the peak of the 2021 bull market. Additionally, there was emotional exhaustion; the explosive growth of the meme sector and the frenzy of funds attracted a large number of retail and institutional investors, but behind this was a singular expectation of "continuing bull market." Once the trend reversed, the destructive power was immense. Therefore, the market had long become a "house of cards built on high leverage," and it only took a spark for it to collapse instantly.

Triggering Mechanism: USDe, wBETH, and BNSOL Decoupling. The real trigger for the crisis was the simultaneous decoupling of three key assets: USDe (a new type of over-collateralized stablecoin) briefly fell below $0.93 due to insufficient liquidation of some reserve assets, triggering a chain panic; wBETH (a liquidity derivative of staked Ethereum) saw its discount widen to 7% due to insufficient liquidity and liquidation pressure; BNSOL decoupled under the withdrawal of cross-chain bridge funds, with a discount of nearly 10%. All three were widely used as collateral and trading pairs in the market. When their prices rapidly deviated from fair value, the liquidation engines misjudged the risk, and the value of collateral plummeted, further amplifying the chain reaction of liquidations. In other words, the failure of these "core liquidity assets" became the fuse that ignited the market's self-destruction.

The transmission chain of the market collapse: from decoupling to liquidation. The transmission logic of the event can be summarized as: decoupling shocks collateral → insufficient margin triggers liquidation → CEX/DEX compete to liquidate and sell → price avalanche → more collateral decouples, forming a positive feedback loop. Especially under the "unified account margin model," where user asset pools are shared, the plummeting of collateral such as USDe and wBETH directly dragged down the overall health of the account, leading to large-scale nonlinear liquidations. This flaw became the most fatal structural risk point in the 1011 incident. Differences in the clearing mechanisms of CEX and DEX. Centralized exchanges (CEX) often adopt automatic liquidation (ADL) and forced liquidation mechanisms; once margin is insufficient, the system enforces liquidation. This often exacerbates "cascading" during high volatility. Exchanges like Binance and OKX, due to high user concentration, have extremely large liquidation scales. Decentralized exchanges (DEX) typically use smart contracts for liquidation, which is transparent on-chain, but due to limited on-chain settlement speed, price slippage and gas congestion restrict liquidation efficiency, leading to some positions being "unable to be liquidated immediately," further distorting prices. In the 1011 incident, the combination of CEX and DEX clearing mechanisms created a "double cascading effect."

Collateral Risk: The Fatal Flaw of the Unified Account Margin Model. The "unified account margin model" (Cross-Margin with Shared Collateral) that has become popular in the crypto market in recent years was originally intended to improve capital efficiency by allowing different assets to share margin. However, in extreme situations, this model amplifies risks: USDe and wBETH discounts → total account equity shrinks; worsening margin rates → trigger a chain of forced liquidations; forced liquidation pressure → further depresses collateral prices. This positive feedback loop means that small-scale collateral decoupling can rapidly evolve into systemic liquidation.

The 1011 incident was not a single black swan but rather the result of a combination of macro surprise + leverage vulnerability + collateral failure + clearing defects. Trump's tariff policy was the trigger, while excessive leverage and the unified account model acted as the detonator. The decoupling of USDe, wBETH, and BNSOL served as the direct trigger, and the CEX/DEX clearing mechanisms acted as amplifiers accelerating the collapse. This crisis reveals a harsh reality: the crypto market has evolved from an "independent risk asset pool" into a complex system highly coupled with global macro and geopolitical factors. In this framework, any external shock can trigger a chain reaction through leverage and collateral structures, ultimately evolving into a "Lehman moment" type of liquidity collapse.

II. Historical Comparison and Analysis

On March 12, 2020, the global capital markets faced historic panic amid the spread of the COVID-19 pandemic and a collapse in oil prices, entering the "crypto Lehman moment" of the COVID liquidity crisis. U.S. stocks triggered circuit breakers, dollar liquidity became extremely tight, and risk aversion led to a sell-off of all high-risk assets. Bitcoin plummeted from around $8,000 to less than $4,000 in a single day, a drop of over 50%, leading to widespread descriptions of the "crypto Lehman moment." The essence of the 312 incident was the transmission of macro liquidity shocks to the crypto market: a dollar shortage forced investors to sell off all non-core assets, and the difficulty of exchanging stablecoins surged; at that time, the market infrastructure was weak, DeFi was still small, and liquidations were mainly concentrated on centralized exchanges like BitMEX. Leveraged funds were forced to liquidate, and on-chain collateral assets were also subject to runs, but the overall market was still in its early stages, and the crisis, though severe, was more a result of external macro shocks combined with leveraged liquidations.

Entering 2021, Bitcoin broke through $60,000, and market sentiment became euphoric. In May, the Chinese government introduced a series of policies to regulate mining and crack down on trading, coupled with the SEC's compliance scrutiny of trading platforms, putting significant regulatory pressure on the crypto market. Against the backdrop of excessive leverage and over-optimism, over $500 billion in market value evaporated in a single day, with Bitcoin briefly dropping to around $30,000. The characteristics of the 519 incident were the combination of policy and internal market vulnerabilities. On one hand, as a major country in mining and trading, China's regulation directly weakened BTC network hash rate and market confidence; on the other hand, the high positions in perpetual contracts led to rapid transmission of the liquidation chain. Compared to 312, the trigger point of 519 leaned more towards the combination of policy and structural risks, showing that the crypto market, in its process of mainstreaming, could no longer avoid regulatory and policy variables.

The "1011 bloodbath" on October 11, 2025, was a "complex system moment" of macro + leverage + collateral decoupling, with over $19 billion in liquidations in a single day, and Bitcoin dropping from $117,000 to $101,800. Compared to 312 and 519, the complexity and systemic characteristics of 1011 are more pronounced. First, at the macro level: Trump's imposition of a 100% tariff on China directly escalated geopolitical friction into economic confrontation, putting pressure on the dollar and all risk assets. Its impact is similar to 312, but the backdrop is no longer a pandemic black swan but a predictable conflict under political and economic games. Second, market vulnerabilities: leverage rates were again at historical peaks, with BTC and ETH hovering at high levels, and the meme frenzy brought excessive optimism, while liquidity was significantly lacking due to the Federal Reserve's balance sheet reduction and slowing stablecoin expansion. This is similar to the environment of 519—optimistic sentiment combined with fragile structures, but to a greater extent. Third, the triggering mechanism: the simultaneous decoupling of USDe, wBETH, and BNSOL was a unique "internal trigger point" of 1011. As foundational collateral and trading pairs, once their prices deviated from fair value, the entire margin system collapsed. This was a situation not seen in 312 and 519, marking collateral risk as a new systemic weakness.

The similarities among the three crises reflect the fateful logic of the crypto market: "high leverage - liquidity vulnerability - liquidation chain." External shocks served as triggers (312 pandemic, 519 regulation, 1011 tariffs), while internal leverage and insufficient liquidity acted as amplifiers; single-day volatility exceeded 40% in all cases, accompanied by massive liquidations and significant damage to market confidence. The differences lie in the fact that 312 was a single macro shock, with the market still small and on-chain effects limited; 519 was a resonance of regulation and leverage, reflecting the direct shaping of the market by policy variables; 1011 was a combination of macro + leverage + collateral decoupling, with the crisis transmitting from external factors to internal core assets, reflecting the complexity after system evolution. In other words, the chain of crisis is continuously extending: from "macro single point" → "policy overlay" → "internal core asset self-collapse." Through these three historical collapses, we can see the evolution path of risks in the crypto market: from marginal assets to system coupling: the 312 incident was more of an external shock, while the 1011 incident in 2025 is highly bound to global macro and geopolitical factors, indicating that the crypto market is no longer an "independent risk pool." From single leverage to collateral chain: early crises mainly stemmed from excessively high contract leverage, while now it has evolved into stability issues of collateral assets themselves, with the decoupling of USDe, wBETH, and BNSOL as typical cases. From external amplification to internal self-destruction: 312 mainly relied on macro sell-offs for transmission, 519 combined regulation and leverage, while 1011 shows that the market can now form a self-destructive chain internally. Gaps in infrastructure and institutional constraints: the unified account margin model amplifies risks in extreme conditions, and the combination of CEX/DEX clearing accelerates cascading, indicating that the current market institutional design still prioritizes "efficiency," while the risk buffer mechanisms are severely lacking. The three crises of 312, 519, and 1011 witness the evolution of the crypto market from "marginal assets" to "system coupling" in just five years. 312 reveals the fatality of macro liquidity shocks, 519 exposes the double-edged sword of policy and leverage, while 1011 presents the first comprehensive outbreak of collateral failure and structural risks. In the future, the systemic risks of the crypto market will become more complex: on one hand, it is highly dependent on dollar liquidity and geopolitical patterns, becoming a "highly sensitive node" in the global financial system; on the other hand, internal high leverage, cross-asset collateral, and the unified margin model make it prone to accelerated collapse during crises. For regulators, the crypto market is no longer a "shadow asset pool," but a potential source of systemic risk. For investors, each collapse is a milestone in the iteration of risk awareness. The significance of the 1011 incident lies in the fact that the Lehman moment of the crypto market is no longer just a metaphor but may become a reality.

III. Impact Analysis of the Sector: Repricing of the Crypto Market After the 1011 Incident

Meme Sector: From Frenzy to Retreat, Value Disillusionment After FOMO. The meme sector was undoubtedly the brightest track in the first half of 2025. The classic effects of Dogecoin and Shiba Inu, combined with the popularity of new-generation Chinese memes, made memes a gathering place for young users and retail funds. Driven by FOMO sentiment, the daily trading volume of individual coins exceeded billions of dollars, becoming a major source of trading volume for both CEX and DEX. However, after the 1011 incident, the structural weaknesses of meme coins were fully exposed: liquidity concentration: overly reliant on top exchanges and a single liquidity pool, leading to significant price slippage once market panic set in. Lack of underlying value: the valuation of meme coins relies more on social narratives and short-term traffic, making them unable to withstand systemic liquidity runs. The funding effect is fleeting: retail investors retreat, and institutions cash out, leading to a short-term "value disillusionment." It can be said that the "traffic - price - funding" closed loop of the meme sector cannot be maintained under macro shocks. Unlike traditional assets, the vulnerability of memes stems from the lack of verifiable cash flow or collateral logic, making it one of the sectors that suffered the largest declines during the crash. Memes are not only speculative assets but also a "social expression" for the younger generation of investors. Their explosion reflects group psychology, identity recognition, and internet subculture. However, in the current highly financialized environment, the lifecycle of memes is shorter, and the funding effect is more prone to backlash. After 1011, the short-term narrative of memes has essentially collapsed, and the future may return to a niche survival pattern of "long-tail cultural coins" and "branded memes."

DAT Sector: Repricing of Digital Asset Treasury. Three representative cases: MicroStrategy (MSTR): continuously increasing Bitcoin holdings through bond issuance, representing the "single-coin treasury model"; Forward: focusing on Solana treasury asset management, emphasizing ecological binding; Helius: switching from a medical narrative to a "Solana treasury platform," relying on staking income and ecological cooperation to generate cash flow. The core of the DAT model is to hold crypto assets as "reserve-like" and obtain cash flow through staking, re-staking, and DeFi strategies. In a bull market, this model can achieve NAV premiums, similar to "crypto closed-end funds." After the 1011 incident, the market's pricing logic for DAT companies rapidly contracted: asset side shrinkage: prices of BTC/ETH plummeted, directly lowering the NAV of DATs. The direct impacts include: 1. Disappearance of premiums: the previously granted mNAV premium (Market Cap / NAV) was based on expectations of expansion and cash flow, but after the crisis, the premium quickly reverted, with some small DATs even trading at a discount. 2. Liquidity differentiation: large companies like MSTR have financing capabilities and brand premiums, while small DATs lack liquidity and experience severe price fluctuations. 3. Large companies vs. small companies: liquidity differences. Large companies (like MSTR): can still expand their treasury through secondary market issuance and bond financing, with strong risk resistance; small companies (like Forward and Helius): rely on token issuance and re-staking income for funding, lacking financing tools, and once faced with systemic shocks, both cash flow and confidence suffer.

Sustainability of the model and ETF substitution effects. The long-term competitive pressure on DAT comes from ETFs and traditional asset management tools. As BTC and ETH spot ETFs gradually mature, investors can gain exposure to crypto assets through low-fee, compliant channels, compressing the premium space for DATs. Their future value lies more in: whether they can build excess returns through DeFi/re-staking; whether they can establish ecological synergy (such as binding to a public chain); and whether they can transform into "crypto asset management companies."

Perp DEX Sector: Restructuring of the Contract Market Landscape. The Hyperliquid ETH-USDT liquidation incident saw large-scale liquidations of ETH-USDT contracts on Hyperliquid during the 1011 incident, with temporary liquidity shortages leading to price dislocation. This event revealed the liquidity vulnerability of on-chain contract markets during extreme conditions: market makers withdrew funds, causing depth to plummet; the liquidation mechanism relied on price feeds and on-chain prices, with response speed limited by block confirmations; when user margins were insufficient, liquidation efficiency was low, leading to additional losses. The ADL mechanism and funding rates hit historical lows. Decentralized contract platforms often use ADL (automatic liquidation) to prevent under-collateralization, but in extreme conditions, ADL can lead to ordinary users being passively liquidated, creating secondary cascades. Meanwhile, funding rates fell to multi-year lows after the 1011 incident, indicating that leverage demand was severely suppressed, and market activity declined. On-chain vs. centralized: differences in resilience: centralized exchanges (CEX): have stronger liquidity depth and higher matching efficiency, but the risk lies in user concentration; once a systemic cascade occurs, the scale is massive; decentralized exchanges (DEX): have high transparency, but during extreme conditions, they are limited by block throughput and gas fees, making their resilience even weaker. This incident shows that Perp DEX has yet to resolve the contradiction between "efficiency and safety," performing worse than CEX during extreme conditions, becoming a shortcoming in the market.

Future trends in the contract market landscape: looking ahead, the contract market landscape may see the following trends: CEX continues to dominate: leveraging liquidity and speed advantages, CEX remains the main battlefield; DEX seeks innovation: improving resilience through off-chain matching + on-chain settlement, cross-chain margining, etc.; hybrid models emerge: some new platforms may adopt a CEX-DEX hybrid structure, balancing efficiency and transparency; regulatory pressure rises: after the 1011 incident, the liquidation chain of the contract market has drawn attention, and future leverage restrictions may become stricter.

Repricing logic of the three sectors: Meme sector: from frenzy to retreat, the future may return to niche culture and branding, making it difficult to recreate a market-level liquidity center. DAT sector: premium logic is compressed, large companies have strong risk resistance, while small companies are highly vulnerable, with ETFs becoming long-term substitute competitors. Perp DEX sector: extreme conditions expose liquidity and efficiency flaws, requiring technological innovation and institutional improvement in the future, or they will still struggle to compete with CEX. The 1011 incident is not only a market liquidation but also the starting point for sector repricing. Memes have lost their bubble support, DAT has entered a rational valuation phase, and Perp DEX faces challenges of restructuring. It is foreseeable that the next round of expansion in the crypto market will inevitably occur under a more complex institutional and regulatory framework, with 1011 becoming an important milestone in this turning point.

IV. Investment Outlook and Risk Reminders

The 1011 incident once again revealed the collective behavior patterns of the crypto market: during bullish trends, leverage usage often rises exponentially, with both institutions and retail investors inclined to maximize capital efficiency in hopes of obtaining short-term excess returns. However, when external shocks occur, the excessive concentration of leverage makes the market extremely vulnerable. Data shows that the open interest (OI) of perpetual contracts for BTC and ETH was nearing historical highs in the week leading up to 1011, with funding rates soaring to extreme levels. Accompanied by a price crash, the scale of liquidations accumulated to $19 billion within hours, forming a typical "herd stampede": once market expectations reversed, investors rushed to liquidate and flee, exacerbating the price avalanche. The market's hotly debated "TACO trade" (Trump Anticipated China Outcome trade) essentially involved pricing and speculative operations based on Trump's policy signals in advance. The market generally believes that Trump is adept at creating price volatility through extreme rhetoric and policy surprises, thereby indirectly manipulating market expectations. Some funds even positioned short before the announcement, leading to asymmetric games in the market: on one side were retail investors and momentum funds with high leverage, and on the other side was the "expected trading" of smart money. This arbitrage operation based on political signals reinforced the emotional disconnection and irrational volatility in the market.

Investor stratification: Old Era "Hope Strategy" vs. New Era "Narrative Arbitrage." The 1011 incident highlighted the stratification differences among investors: old-era investors still rely on the "hope strategy," meaning long-term holding and believing that prices will rise due to macro liquidity or halving cycles, lacking awareness of structural market risks; new-era investors are more adept at "narrative arbitrage," quickly switching positions based on policy news, macro signals, or on-chain funding flow dynamics, pursuing short-term risk-return ratios. This stratification leads to a lack of intermediate forces in the market during extreme conditions: either overly optimistic long-term investors passively bear losses, or high-frequency arbitrage funds dominate short-term volatility, exacerbating overall market fluctuations. The 1011 incident once again proves that the crypto market has become highly financialized and cannot exist independently of the macro environment. The Federal Reserve's interest rate decisions, the state of dollar liquidity, and Sino-U.S. geopolitical frictions are all shaping the pricing logic of crypto assets in real-time.

From a regulatory perspective, countries around the world have begun to notice three major concerns: insufficient transparency: limited disclosure of stablecoin and derivative collateral assets, easily triggering trust crises; user protection gaps: opaque leverage and liquidation mechanisms expose retail investors to asymmetric risks; financial stability risks: the chain reaction effects of the crypto market have already spilled over to U.S. stocks and even commodity markets. It is foreseeable that future regulation will focus on improving transparency, protecting user rights, and establishing a stable framework for integration with traditional finance. In the short term, the market will enter a "de-leveraging" phase. Funding rates have fallen to negative values, indicating a significant contraction in bullish momentum; after the clearing of leverage, BTC and ETH may gradually stabilize at key support levels, with market volatility remaining high but tending to converge. The recovery space for high-risk assets like meme coins is limited, while staking derivative assets and stablecoin ecosystems with robust cash flows may become safe havens during the recovery process. The pace of market recovery depends on two factors: the speed of on-chain leverage digestion and whether the macro environment shows marginal improvement.

The high correlation between Federal Reserve liquidity and the crypto market. In recent years, the correlation between Federal Reserve liquidity and crypto market prices has significantly increased. When dollar liquidity tightens, the issuance of stablecoins slows, the depth of on-chain liquidity pools decreases, directly weakening the market's capacity. Conversely, when liquidity is eased or expectations of interest rate peaks increase, the crypto market often rebounds first. Therefore, the market's performance in the coming months will largely depend on the Federal Reserve's policy direction before the end of the year. If the rate hike cycle indeed ends, the market may see a phase of recovery; if the dollar remains strong, risk assets will still be under pressure.

Regulatory trends: transparency, user protection, financial stability framework. The focus of regulatory efforts in various countries will include: transparency of stablecoin reserves: requiring disclosure of asset composition to avoid "shadow banking"; regulation of leverage and liquidation mechanisms: setting reasonable leverage limits and increasing risk control buffers; systemic risk firewall: establishing cross-market risk monitoring to prevent crypto risks from spilling over into the banking system. For investors, regulation may bring short-term uncertainty, but in the long run, it will help reduce systemic risks and enhance institutional confidence in entering the market.

Risk points and opportunities in the coming months. Risk points: the continued escalation of Sino-U.S. trade frictions, further impacting risk assets; stablecoins or derivatives may experience localized decoupling again, triggering market panic; if the Federal Reserve maintains a hawkish stance, a deteriorating funding environment will drag down crypto valuations. Opportunity points: high-quality staking derivatives (such as LSTs and re-staking protocols) may benefit from safe-haven demand; the compliance process for stablecoins may bring long-term incremental inflows from institutions and compliant funds; quality public chains and DeFi blue chips may have medium to long-term layout value after valuation corrections. The 1011 bloodbath serves as a collective awakening for the crypto market, reminding investors that crypto assets are deeply embedded in global financial logic, and leverage overextension and herd effects will amplify risks during extreme conditions. In the coming months, the market's recovery path will depend on the progress of de-leveraging and macro policy shifts, while regulatory trends will gradually clarify under the frameworks of transparency and financial stability. For investors, risk management and narrative recognition abilities will be key to navigating high-volatility cycles.

V. Conclusion

After the 1011 incident, the investment logic of the crypto market is undergoing a profound repricing. For investors in different sectors, this crisis is not only a loss but also a mirror reflecting the strengths and weaknesses of their respective models. First, investors in the meme sector need to recognize that memes are essentially "narrative-driven short-cycle flow assets." During bull markets, social effects and FOMO can amplify price increases, but under systemic shocks, their weaknesses due to lack of cash flow and underlying value are easily exposed. Second, investors in the DAT sector should be cautious of the contraction of premium logic. Large treasury models like MicroStrategy still possess risk resistance due to their financing capabilities and brand advantages; however, small and medium DAT companies often face discounts under liquidity shocks due to their excessive reliance on token issuance and re-staking income. Third, investors in Perp DEX need to acknowledge the inadequacies of on-chain liquidity during extreme conditions. Finally, from a global perspective, liquidity fragmentation will be the norm in the future. Against the backdrop of high dollar interest rates, tightening regulations, and complex cross-chain ecosystems, market funds will become more dispersed, and volatility will be more frequent. Investors need to build "resilient portfolios": on one hand, by controlling leverage and diversifying positions to adapt to volatility, and on the other hand, by locking in assets with cash flow, institutional resilience, and ecological binding advantages. The 1011 incident tells us that the evolution logic of crypto investment is shifting from "pure speculation" to "adaptive survival": investors who can adjust strategies and identify structural value will gain stronger survival capabilities, while those blindly chasing bubbles and leverage are destined to be eliminated in the next systemic shock.