Galaxy Digital CEO Mike Novogratz says the October 10th crash in crypto was far more than a routine shakeout, claiming that roughly a third of market makers in parts of the ecosystem were effectively wiped out.<\/p>\n
\u201cWe had a flash crash and it did a lot of damage to the fabric of the market,\u201d Novogratz told Anthony Scaramucci on the first-ever episode of \u201cAll Things Markets,\u201d recorded November 26. \u201cEven on Hyperliquid, the market makers, you know, 30 percent of them went out of business. Got zeroed.\u201d<\/p>\n
Scaramucci framed the last 20 trading days as another brutal reminder of crypto\u2019s structural volatility. \u201cI know I have a trap door on my portfolio,\u201d he said. \u201cOnce in a while I\u2019ll be walking across the living room feeling beautiful about myself. And then, boom, a trap door opens and I have fallen into the basement of the house.\u201d<\/p>\n
According to Novogratz, this particular trap door opened at Binance. \u201cIt started really by, you know, at Binance, they had an oracle which set price misfunction,\u201d he said. That error hit a synthetic stablecoin and \u201ccreated a cascade where people were getting stopped out because there was the wrong price.\u201d The dislocation then bled into levered perpetual markets \u201clike Hyperliquid, like Uniswap,\u201d where \u201cas prices went down, people started getting liquidated.\u201d<\/p>\n
He argued that the way crypto participants use leverage turned a technical glitch into a systemic event. \u201cWhat people don\u2019t understand about crypto is that the crypto investor doesn\u2019t play for 10, 11, 12 percent returns,\u201d he said. \u201cCrypto investor call themselves degens with pride. They want to turn one into 15. And so they trade a very volatile asset with a lot of leverage.\u201d<\/p>\n
Perpetual futures make that leverage particularly dangerous for liquidity providers<\/a>. \u201cPerpetual futures are not normal futures,\u201d Novogratz said, crediting \u201cthe genius that Arthur Hayes<\/a> and his group of people\u201d for a design where \u201cas longs get liquidated, they\u2019re paired off against shorts.\u201d In a fast collapse, \u201cyou could be short and you lose your short position. Well, if you\u2019re long on another exchange against that short position, you\u2019re shit out of luck. And that happened to a lot of market makers.\u201d<\/p>\n The result, he said, was a sharp loss of liquidity and retail capital. \u201cWe lost a lot of liquidity in the market. We lost a lot of retail punters who lost their stack,\u201d he noted, adding that after such a wipeout \u201cit takes a while for Humpty Dumpty to get put back together again.\u201d<\/p>\n Novogratz said he initially expected higher levels to hold. \u201cI actually, to be fair, thought we were going to hold at higher levels at $90,000,\u201d he admitted. \u201cAnd we went all the way to $80,000. $80,000 was a maximum pain point\u2026 Got to $1.80 on XRP. We got to $125 on Solana. Real pain points.\u201d<\/p>\n He links the subsequent rebound to macro tailwinds, not healed sentiment. \u201cNow we bounce up. We bounce because of the Fed. But we\u2019re not out of the woods,\u201d he said. \u201cI do think Bitcoin will climb back towards $100,000 by the end of the year, but there\u2019ll be sellers waiting there. We\u2019ve done some medium-term damage to the psychology of the market.\u201d<\/p>\nWill The Crypto Market Recover?<\/h2>\n