Why Did Some Altcoins on Binance Crash to Zero?

Key takeaways

• Some altcoins, including Cosmos’ ATOM token, briefly fell near zero on Binance during Friday’s cryptocurrency market crash.

• The same altcoins hold real market value on other centralized cryptocurrency exchanges.

On October 10, the cryptocurrency suffered its steepest decline since the FTX collapse, with the total market capitalization falling by about $850 billion in a matter of hours.

Bitcoin (BTC) fell about 10-15%, from highs near $124,000 to lows near $105,000. However, altcoins fared much worse, especially those traded on Binance, with many of them falling 99.99-100% in minutes.

This includes tokens like Cosmos (ATOM), IoTeX (IOTX), and Enjin (ENJ), whose prices on Binance briefly reached zero.

In comparison, ATOM shares were down 53% on competing exchanges, while IOTX and ENJ shares were down 46% and 64.5%, respectively. However, none of them have reached zero ratings anywhere else, a phenomenon seen exclusively on Binance.

Why did these altcoins drop to zero?

Nearly $20 billion worth of cryptocurrency positions were liquidated during the October 9-10 crash, about 20 times more than were liquidated during the COVID-19 market rout in 2020. More than 1.6 million traders lost their positions after leverage wiped them out.

Many of these traders used leverage (borrowed money) on Binance to boost their profits.

Arthur Hayes, co-founder of BitMEX, said major exchanges, including Binance, were “liquidating collateral associated with cross-margin positions,” exacerbating the sell-off.

Simply put, when prices started to fall, Binance automatically sold altcoins used as collateral to cover losses. This caused more selling pressure, pushing prices down faster.

As prices fell, Binance’s trading systems became overloaded. Some users reported accounts being frozen, stops being missed, and trades being delayed.

Meanwhile, some analysts reported that market makers like Wintermute withdrew their funds from Binance due to these delays.

Related to: Crypto.com CEO calls for investigation into exchanges after $20 billion liquidation

This meant that there were no buy orders remaining for a few moments, so the system showed “zero” prices for some coins, even though the tokens still had value elsewhere.

A similar “flash crash” occurred in 2017, when Ethereum’s price briefly fell to $0.10 on GDAX after a torrent of automated sell orders.

Binance issues an apology

Binance Co-Founder Yi He (CEO) Issued It apologized, saying that “some users experienced issues with their transactions” amid high volatility and increased platform traffic.

CEO Richard Teng also I apologizestating:

“I’m truly sorry to everyone affected. We’re not making excuses — we’re listening closely, learning from what happened, and committed to doing better.”

Binance stated that it will compensate users for verifiable losses directly related to platform or system failure, clarifying that losses resulting from price fluctuations or unrealized gains are not eligible for compensation.

This article does not contain investment advice or recommendations. Every investment and trading move involves risks, and readers should conduct their own research when making a decision.