The Oct. 10 crypto flash crash was one of those moments when theory met practice in the space of minutes. Prices plunged, liquidity almost vanished, and many assets proved their mettle -- or failed to prove it -- during immense stress and volatility. Most coins are still lower than their prices on Oct. 9, and some might not recover.
This was the most intense crash in crypto history. There are three lessons that matter the most for investors to learn from this episode. Let's go over each.
Lesson 1: Don't borrow to buy crypto, ever
When prices lurch, borrowing, also known as trading or investing using financial leverage, turns a bump into a cliff.
Between Oct. 10 and Oct. 11, the crypto market suffered the largest liquidation purge of leverage on record, with more than $19 billion in positions wiped out as newly announced tariff headlines hit and liquidity evaporated.
In short, practically anyone using leverage, including those using relatively conservative amounts, got their position liquidated as a result of crypto exchanges seizing their collateral to prevent losses of their own as positions rapidly sank to become deeply underwater. Many people lost their entire portfolios due to poor risk management of their leveraged bets, but many experienced crypto investors got wiped out right along with the less cautious players.
The point here is not to shame anyone. But it's important to be honest about the mechanics. Both centralized and decentralized crypto exchanges (DEXes) can experience abrupt moves, and a position using even small amounts of borrowed exposure can be tapped out before an investor can react, regardless of any sound long-term thesis for owning the underlying asset.
The solution here is to avoid leverage. Buy and hold spot crypto, and aim to do so for the long term. Size your positions so that volatility feels survivable rather than existential.
Lesson 2: Most altcoins don't have true buy-the-dip demand
A second (and for crypto investors, quite unpleasant) truth from the flash crash is that many popular altcoins still rely on market makers -- who buy or sell when others won't -- more than genuine demand from investors during stress.
Excluding Bitcoin (BTC 1.93%), Ethereum, (ETH -0.02%), and stablecoins, coins across the crypto sector fell by roughly 33% in about 25 minutes at the peak of the crash. Major coins with real networks took body blows, but they didn't evaporate. Solana (SOL 0.24%) posted a sharp double-digit percentage decline during the break, then consolidated as the market found footing.
But meme coins like Dogecoin were not lifeboats, despite being totally unrelated to any economic issues or tariffs. DOGE briefly tumbled by about 50% intraday before stabilizing. Many altcoins fell 70% or more. Some even temporarily saw their prices fall to nearly $0. What's more, the few assets that went to nearly $0 were in the top 100 of the largest cryptocurrencies by market cap, so size did not necessarily equal safety.
The reason that happened is that market makers withdrew their liquidity services during the flash crash. With no liquidity to make the market, those altcoins simply didn't have buyers at the prevailing price levels, so their price fell, and fell, and fell some more. Thus, one frank question investors need to now ask themselves about any crypto investment they hold is whether there would be anyone interested in actually buying it under similar circumstances in the future.
The takeaway here is to treat many altcoins for what they currently are: highly speculative assets with questionable underlying value. If you invest outside the top echelon of crypto assets, insist on a visible, durable use case and evidence of fundamental demand and value generation.
Lesson 3: Bitcoin is still crypto's safe asset
The final lesson is that the crash underlined that Bitcoin remains the asset of first resort when the sector is in a panic or when investors sense danger.
In the sell-off, Bitcoin declined less than many large-cap coins and stabilized much faster, aided by a large cohort of dip buyers and an increasingly global holder base that does not depend on any single crypto exchange to function. Bitcoin's capital share within crypto stayed comparatively steady as the dust settled, which is a sign of capital shifting to perceived quality in a rush.
In practice, that means portfolios should be anchored with Bitcoin, then built out with great care and selectivity. If you want exposure beyond Bitcoin, consider a modest, thesis-led basket that includes a network like Solana for throughput-driven use cases and Ethereum for exposure to decentralized finance (DeFi).
If you don't think that you could stomach buying the dip after a crash or holding your investment for at least a handful of years, it's probably better to look elsewhere.
