Why Did Some Altcoins on Binance Momentarily Drop to Zero?
During a sudden and severe market downturn on October 10, several altcoins briefly plummeted to near-zero prices on Binance, one of the world’s largest cryptocurrency exchanges — a phenomenon not observed on other trading platforms. Among the affected tokens were Cosmos (ATOM), IoTeX (IOTX), and Enjin (ENJ), all of which momentarily lost nearly 100% of their value on Binance alone, while maintaining significantly higher valuations elsewhere.
The sharp crash unfolded during one of the worst trading days for the crypto market since the collapse of FTX. Within hours, the total market capitalization of digital assets nosedived by approximately $850 billion. Bitcoin, the flagship cryptocurrency, tumbled between 10% and 15%, dropping from around $124,000 to as low as $105,000. While this decline was substantial, the altcoin sector suffered even more dramatically — especially on Binance, where some tokens endured nearly total value wipeouts.
For instance, Cosmos’s ATOM fell by roughly 53% on competing exchanges, while IOTX and ENJ dropped by 46% and 64.5% respectively. However, none of these cryptocurrencies actually reached a zero valuation anywhere except Binance, indicating that the issue was not market-wide but likely tied to the exchange’s internal systems.
This unprecedented plunge was fueled by massive liquidations. Over the 24-hour period spanning October 9–10, nearly $20 billion in leveraged positions were wiped out — a figure nearly 20 times higher than the total liquidated during the COVID-19 market crash in 2020. More than 1.6 million traders found themselves forcibly closed out of positions, primarily due to high leverage and cascading margin calls.
A major factor behind this sudden collapse was the liquidation of collateral in cross-margin positions. According to Arthur Hayes, co-founder of BitMEX, exchanges such as Binance began force-selling crypto assets used as collateral to cover losses as prices dropped. This triggered a chain reaction: as more positions were forcibly liquidated, selling pressure intensified, causing prices to spiral downward even faster.
Binance’s systems, under immense stress from both market activity and user interactions, began to falter. Reports flooded in from users who experienced trading delays, failed stop-loss orders, and frozen accounts. At the same time, some market makers — including major players like Wintermute — reportedly pulled liquidity from the platform, further compounding the problem. With reduced buy-side support, even a small number of sell orders could result in extreme price movements, including temporary zero valuations.
This situation mirrored a similar incident in 2017, when Ethereum momentarily dropped to $0.10 on GDAX (now Coinbase Pro) due to a wave of cascading sell orders overwhelming the order book.
In response to the chaos, Binance’s Chief Customer Service Officer Yi He issued a public apology, acknowledging transaction issues during the volatile trading window. CEO Richard Teng also addressed the concerns, expressing regret over the platform’s performance during the crash.
Binance has pledged to compensate users who can demonstrate losses directly linked to technical or system malfunctions on the exchange. However, the company clarified that losses attributed to market volatility or unrealized profits will not be eligible for reimbursement.
What Caused the Discrepancy Between Binance and Other Exchanges?
The divergence in asset prices between Binance and other platforms points to a liquidity failure rather than a fundamental valuation collapse. On exchanges, pricing is determined by the balance of buy and sell orders in the order book. If there are no buyers at a given moment, even a small sell order can drive the last traded price dramatically lower — potentially to zero — until liquidity returns.
While other exchanges retained sufficient liquidity to absorb sell pressure, Binance’s systems were overwhelmed. This suggests that either trading infrastructure failed to respond in real-time or that market makers withdrew too rapidly, leaving the exchange exposed. In either case, the platform’s inability to maintain orderly markets during a crisis resulted in these flash crashes.
Could This Happen Again?
Unfortunately, yes. Flash crashes are an inherent risk in highly leveraged, thinly liquid markets — especially during periods of extreme volatility. Although exchanges implement safeguards like circuit breakers and minimum price thresholds, these mechanisms can fail under stress or be insufficient to prevent instantaneous collapses when liquidity disappears.
To reduce future risk, exchanges must improve infrastructure, ensure liquidity commitments from market makers, and enhance transparency around liquidation protocols. For traders, using high leverage on centralized platforms comes with significant danger — especially if the platform cannot handle stress scenarios.
Implications for Investors and Traders
This event serves as a stark reminder of the risks tied to leverage and centralized exchanges. Traders using borrowed funds are particularly vulnerable to rapid market movements, and in the case of Binance, even system instability can amplify losses. Moreover, the brief appearance of zero-price trades — even if not reflective of actual market value — can trigger stop-loss orders and margin calls, compounding damage.
Investors should also be cautious about storing large positions on a single exchange. Diversifying across platforms and wallets helps mitigate the risk of platform-specific failures. Moreover, it’s prudent to avoid excessive leverage unless one fully understands the liquidation mechanisms of the trading venue.
How Exchanges Can Restore Trust
Rebuilding user confidence after such events requires transparency and accountability. Binance’s promise to compensate users affected by technical failures is a step in the right direction. However, long-term trust will depend on whether the platform can prevent a recurrence.
This includes conducting thorough post-mortem analyses, releasing detailed reports on what went wrong, and implementing substantial improvements to both technical infrastructure and risk management systems. Enhanced communication during volatile periods, including real-time updates on platform status and liquidity conditions, would also help reassure users.
Regulatory Ramifications
Such occurrences raise regulatory red flags. Authorities may scrutinize how centralized exchanges manage leveraged positions and protect traders during high-volatility events. Regulators could push for mandatory circuit breakers, tighter margin requirements, and improved transparency in liquidation processes.
As the crypto market matures, exchanges that demonstrate robustness during crises will likely gain a competitive edge. Those that fail to adapt may face reputational damage, diminished user trust, and increased regulatory scrutiny.
Conclusion
The temporary collapse of certain altcoin prices to zero on Binance was not a reflection of the assets’ real-world value, but rather the result of internal system overloads, liquidity failures, and a cascade of forced liquidations. While the broader crypto market experienced a sharp downturn, Binance’s unique trading environment exacerbated the losses for many users.
This event highlights the critical importance of robust infrastructure, balanced risk management, and platform transparency in a rapidly evolving and often volatile digital asset ecosystem. For both traders and exchanges, the lessons are clear: resilience, preparation, and accountability are essential for long-term survival in the world of crypto.