October 11 Data Observation After the Flash Crash: Liquidity and the Severity of the Big Dump Are Proportional, Prices Have Generally Recovered 80%

Author: Frank, PANews

Although more than ten days have passed, the flash crash on October 11th still leaves the market shaken. On that day, many tokens’ prices approached “zero” in a very short time, only to rebound violently by hundreds or even thousands of times afterward, causing extreme market panic.

How severe was this epic big dump? Which categories of tokens (Narratives) were hit hardest? Behind the astonishing rebound data, has the market’s “true” trauma already healed?

More importantly, is the widely suspected “liquidity exhaustion” actually the real culprit behind this crisis? To clarify the truth, PANews conducted a detailed data analysis of 430 spot trading pairs on Binance from October 10th to October 20th. This article will reveal the facts behind this extreme market condition through multi-dimensional data.

This data analysis uses Binance’s market data for 430 spot trading pairs between October 10th and October 20th.

Big dump and “False” rebound: average instant fall of 66%, how much has the real market recovered?

In reality, the price swings on October 11th were truly shocking. The average fall across all tokens reached 66%, with seven tokens dropping more than 99%, and 32 tokens falling over 90%. The number of tokens falling more than 50% was 344, accounting for 80%.

Looking at the distribution, the most tokens fell between 60% and 90%, totaling 272 tokens, or 63.2%.

After such a huge instant fall, many tokens’ prices hit record lows in a very short time, making the subsequent rebounds appear exaggerated. For example, IOTX’s low point rebounded by 1,230,900% (the lowest point was 0.000001). Additionally, tokens like ENJ, ATOM, and ANKR experienced rebounds exceeding a thousand times. There were also 22 tokens with rebounds over 10 times, which makes the data on the lowest point rebound seem somewhat detached from reality. According to PANews statistics, from the low point on October 11th to the close on October 20th, the average rebound strength across all tokens was 5,509%.

Clearly, looking at this data alone doesn’t fully reflect the actual situation. Therefore, PANews analyzed another perspective—comparing the October 20th price data with the opening prices before the October 11th big dump—to reflect the market’s true decline. From this perspective, the current average price rebound after the big dump is about 17.22% compared to the pre-dump prices, which is much less than the 66% maximum fall mentioned earlier, indicating that the rebound was quite significant. Notably, many tokens’ prices even surpassed their pre-dump levels, with data showing 26 tokens trading above their October 11th opening prices.

Sector performance review: MEME becomes the “hardest hit,” indiscriminate declines point to liquidity issues

From the perspective of token categories, do different results emerge?

First, let’s look at the performance of public chains.

Layer 1 public chains experienced an average maximum fall of about 63% on October 11th, which is comparable to the overall decline. Comparing the prices after the rebound on October 20th with the pre-dump opening prices on October 11th, Layer 1 tokens declined by about 19%, which is worse than the overall level. This suggests that Layer 1 public chains did not remain resilient as in previous declines; instead, they experienced larger drops.

Layer 2’s performance was similar to Layer 1, with an average maximum fall of 65.8%. The decline from October 11th opening to October 20th was about 17.98%, also below the average.

Overall, DeFi and AI tokens performed better than the average. In terms of maximum fall, these two categories roughly matched the overall level, with AI tokens experiencing an average maximum fall of about 63%, better than the overall. In the decline from October 11th opening to October 20th, DeFi tokens saw a 14% fall, indicating a stronger rebound effect than the average.

Among all categories, MEME tokens performed the worst, with an average maximum fall of 78%, making them the most volatile category at that time. Additionally, compared to their October 11th opening prices, their prices fell by 20% by October 20th, indicating limited rebound energy. Historically, MEME tokens have always been high-risk; during such extreme surges and drops, their market fragility is amplified.

Overall, from a category perspective, this big dump showed nearly uniform market performance, with no category standing out positively during this decline. The subsequent rebound was also generally at similar levels. This suggests that the market’s earlier speculation that this crash was caused by liquidity issues may have some basis.

Investigating the “culprit”: trading volume reveals a strong correlation between liquidity and decline

To verify whether liquidity was directly related to the October 11th big dump, PANews further analyzed the liquidity data of these tokens. For example, considering the order book spread, tokens with less than 20% decline on October 11th had an average order book spread of about 0.11%. Tokens with a fall between 70% and 80% had an average spread of around 0.13%.

However, this data has limitations. Among tokens with over 90% fall, the order book spread was as low as 0.07%. This phenomenon might be because exchanges actively increased liquidity for these highly volatile tokens after the crash. (Order book spread data is from October 20th.)

Yet, another set of data still reveals a connection between liquidity and this big dump. According to PANews’s statistics on average trade count and average trading volume, tokens with higher trade counts and trading volumes experienced less fluctuation during the October 11th decline.

Specifically, tokens with a 20%–30% fall had an average of 757,000 trades in 24 hours, with an average trading volume of $239 million. Conversely, tokens with over 90% fall had only about 59,000 trades in 24 hours, with an average daily trading volume of around $6 million. Tokens with over 99% fall performed even worse, with an average of 11,600 trades per day and a daily volume of about $2 million. Compared to tokens with less than 30% fall, these tokens’ trading volumes differ by hundreds of times.

In summary, the data on trade count and trading volume more accurately reflect market demand. It appears that the epic big dump was directly linked to liquidity issues.

How much has the market recovered?

After the big dump, exploring the subsequent direction becomes even more important.

First, looking at futures holdings, the overall market futures open interest dropped sharply after this big dump. According to Coinglass, the total open interest reached a record high of $233.5 billion on October 8th, then decreased to $146.6 billion by October 19th, a decline of 37%.

This change in holdings was even more pronounced in some mainstream altcoins. For example, XRP and DOGE’s open interest decreased by over 65%. On one hand, this decline indicates that the market has addressed the over-leverage problem through this cleansing. On the other hand, the significant drop in open interest also shows that the market remains uncertain about future trends and is in a wait-and-see mode. If this state persists long-term, it could mean entering a cooling-off period.

Additionally, the fear index during this period fell below 40 but remained above 20, indicating the market has not entered extreme panic.

Regarding stablecoins, issuance has not slowed due to market panic. As of October 21st, stablecoin issuance reached $3.077 trillion, continuing to set new records. According to CoinDesk, Citigroup is optimistic that stablecoins will be the main driver of the next growth phase in cryptocurrencies.

In summary, the market crash on October 11th was both an indiscriminate slaughter and an inevitable result of prior overheated conditions. Deep analysis of this unusual big dump offers some insights: firstly, the ultimate culprit was liquidity shortage; secondly, excessive leverage played a significant role.

Post-crash, the good news is that high leverage has been forcibly removed, reducing resistance to future rises (if the bull run continues). The pessimistic view is that the market may suffer heavy damage and struggle to recover for a long time. Regardless, the biggest warning from this event is that choosing assets with better liquidity is always the best way to avoid risks.