Oct 10–11 Flash Crash: what happened and what it means

Context

Late Oct 10 (US) into early Oct 11 (Europe) the market spiked lower, then snapped back. It is educational, not financial advice.

DYOR.

Why the drop accelerated

- Thin liquidity in a quiet window, plus crowded leverage.

- First support breaks triggered stops and forced liquidations that had to trade.

- Market makers widened or pulled quotes, spreads grew, perps dislocated from spot.

- BTC weakness spilled into ETH and high beta names where leverage was heavier.

- Once forced flow exhausted and depth rebuilt, prices rebounded toward prior references.

How to read a move like this

- Separate mechanical flow (stops, liquidations) from informational flow (new data that shifts fair value).

- Compare spot, perps, and dated futures. Brief perp overshoots that re anchor to spot suggest mechanics.

- Watch repair signals: spreads narrow, 10 to 50 bps depth returns, funding cools, open interest resets lower.

Risk notes

- Sizing first. Cap leverage per asset and per time window. Survival is the edge.

- Respect time of day. US evening and pre Asia can be thinner. Adjust size and stops.

- Avoid clustered tight stops. Consider buffers and staggered exits.

- Reduce single point of failure. Mix spot and perps, diversify venues, keep margin cushions.

What to monitor next

- Open interest and funding after the purge.

- Spot demand versus leverage rebuild.

- Order book resilience and fewer air pockets.