That $1.9 billion liquidation storm has been over for several months, but aftershocks in the market are still continuing. On October 10, Bitcoin fell from about $125,000 all the way down, with the largest drop reaching 12.5%, the most severe decline in 14 months. The question is: who should be held responsible for this disaster?

On the surface, this liquidation seemed fairly routine—a chain of forced liquidations, destroying many traders’ leveraged positions in an instant. But what came next? A complete information black hole. Because nobody could figure out what exactly happened, all the blame pointed to one name: a certain major exchange. This global largest crypto exchange suddenly became the target of public criticism overnight, even though it had been denying all along that it was the culprit.

I noticed that since that day, market liquidity has remained thin. The order book hasn’t fully recovered, the bid-ask spreads have widened, and market depth has become irregular. This isn’t just a trading-volume issue—it’s a structural problem with the entire market. Many traders say that it was precisely this damaged market structure that caused Bitcoin to drop from $124,800 to $80,000, and it even dealt a blow to traders’ confidence.

Recently, the CEO of Ark Invest made remarks on television, claiming that a software malfunction at a certain major exchange caused roughly $28 billion in deleveraging. This immediately drew a response from competitors. The founder of a rival exchange also jumped in, saying that October 10 caused real and lasting damage to the industry. Although these comments didn’t directly name anyone, it was clearly an accusation aimed at the opponent.

But there’s something interesting here: not everyone agrees with this narrative. The CEO of a leading market maker pointed out on social media that October 10 had nothing to do with a software glitch at all, but rather a flash crash that occurred on an extremely illiquid Friday evening. He emphasized that in such market conditions, it’s easy to find scapegoats, but it’s unfair to shift the responsibility to a single exchange.

His logic is very clear: the crypto market itself has structural problems. The market is still highly dependent on leverage, and liquidity is conditional. When pressure comes, market makers widen spreads or withdraw altogether. In such an environment, liquidations accelerate. A certain major exchange might be the largest platform where liquidations occur, but it isn’t necessarily the source of the shock.

The problem is a lack of transparency. There has been no official post-mortem analysis, and no thorough investigation by regulators, which leaves room for conspiracy theories to take root. A former U.S. Commodity Futures Trading Commission (CFTC) regulatory official even suggested an official investigation, drawing a parallel to the 2010 stock market flash crash. He noted that in legitimate financial markets, formal post-event analyses are carried out after systemic shocks, whereas the crypto market lacks such a mechanism.

There are traders who claim that a certain major exchange has been selling off altcoins since October 10, further fueling conspiracy theories about excess inventory. Whether or not that’s true, such claims are always easy to spread when liquidity dries up and confidence declines.

I think that, from a deeper perspective, what people will ultimately remember about October 10 is not the $1.9 billion liquidation figure itself, but the market-structure problems it exposed. In bull markets, the order book is thick, leverage builds up slowly, and liquidity is ample. But bear markets expose the opposite—liquidity dries up, market makers retreat, volatility concentrates, and the next shock arrives faster than expected.

As a former NYSE Arca options trader put it well: he doesn’t know whether a certain major exchange deliberately sabotaged the market, but high leverage combined with low liquidity, plus a bunch of useless altcoin technology—this is a recipe for a bloodbath. It’s only a matter of time; it will happen sooner or later.

In a sense, this reflects a bigger risk-management challenge. When you, as a CIO (chief investment officer) or an institutional investor, assess the risks of the crypto market, the fragility of liquidity should be the top factor to consider. The market may look deep at first glance, but once pressure hits, that depth evaporates.

So while a certain major exchange is easy to become a scapegoat, the real problem is the market’s own fragility. This isn’t an issue with one exchange—it’s a structural problem across the entire ecosystem that needs to be addressed.