Crypto Crash Sours Sentiment as Fear Returns to Markets

Investors who switched off from crypto over the weekend for some well-deserved time away from the charts may have looked at CoinMarketCap or CoinGecko Monday morning and had a bit of a shock.

Late Friday Australian time, the market suffered one of the heaviest crashes – with some altcoins dropping as much as 90%. Bitcoin dropped from around US$122k (AU$187k) to just below US$110k (AU$168.6k) on Sunday, a whopping 10%. By the time of writing it has made its way back up to around US$114k (AU$174.7k), recovering some of the losses.

Most other assets, some with losses well into double digits, also bounced back — including BNB, which rallied more than 14% following platform disruptions that caused major depegs.

According to an analysis by Glassnode, the crash pushed funding rates to their lowest point since the 2022 bear market, signalling a massive unwinding of leverage across crypto markets. The data shows one of the sharpest reductions in speculative positioning on record, suggesting that excess risk-taking has been largely flushed out of the system.

Funding rates across the crypto market have plunged to their lowest levels since the depths of the 2022 bear market.

This marks one of the most severe leverage resets in crypto history, a clear sign of how aggressively speculative excess has been flushed from the system. pic.twitter.com/XBufZmA9vs

— glassnode (@glassnode) October 12, 2025

While the crash and subsequent recovery were largely attributed to President Trump’s tariff spat with China — the familiar on-and-off tit-for-tat — the bigger question is: where to next?

Naturally, fear returned to the market but has since been trending back towards a more neutral stance.

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Nothing’s Changed Fundamentally, Say Analysts

The Kobeissi Letter attributed the sudden market drop to a mix of short-term technical factors rather than fundamental weakness. It noted that the timing of Trump’s announcement — late Friday, when liquidity is low — amplified volatility and triggered outsized price swings.

Despite the crash, the analysts maintained a positive outlook, viewing it as an overdue correction and expressing confidence that a trade deal will eventually support a market rebound.

So, what's next?

We believe this crash was due to the combination of multiple sudden technical factors.

It does NOT have long-term fundamental implications.

A technical correction was overdue, we think a trade deal will be reached, and crypto remains strong.

We are bullish. pic.twitter.com/nYPQlbBeoj

— The Kobeissi Letter (@KobeissiLetter) October 11, 2025

Others, like YouTuber and crypto trader Alex Becker, actually believe this could be the start of a larger bull run. In a video posted over the weekend, Becker said:

Crypto-guru Raol Pal said that the flash crash will quickly reverse and a “V-shaped” recovery will follow:

All said and done, regardless of what sparked it, Friday was a "Flash Crash". Flash crashes usually recover in V-shapes back to their prior price/range and usually go on to make new highs shortly after.

In this case, we entirely wiped out all accumulated leverage too.

Higher.

— Raoul Pal (@RaoulGMI) October 12, 2025

Related: $225B Giant Hargreaves Lansdown Says Bitcoin Too Risky for Investors