According to an analysis by JPMorgan, the sharp crypto market correction between October 10 and 14, 2025, was primarily driven by a deleveraging cycle among crypto-native traders on offshore platforms, rather than a mass exodus of institutional investors.
A Leverage-Induced Liquidation Cascade
The sell-off culminated in a historic liquidation event on October 11th, wiping out over $19 billion in leveraged positions and affecting more than 1.5 million traders. This was triggered by a combination of factors, notably geopolitical tensions and trade policy announcements that sparked a risk-off mood across global markets.
The core of the problem was the excessive use of leverage, particularly in perpetual futures contracts on offshore exchanges. JPMorgan’s data reveals a telling statistic: the open interest in Bitcoin and Ethereum perpetual futures plummeted by about 40% in dollar terms during this period. This drop was steeper than the spot price decline, clearly signaling a massive and forced unwinding of leveraged bets. This cascade of liquidations created a vicious cycle, where falling prices triggered more forced selling, rapidly amplifying the market’s downward move.
The Calm of Institutional Capital
In stark contrast to the chaos in leveraged derivatives, the institutional sector remained remarkably steady. JPMorgan highlighted a clear divergence in behavior between different classes of investors.
Traditional finance vehicles showed significant resilience. Spot Bitcoin ETFs saw only $220 million in outflows, a mere 0.14% of their total assets under management. Ethereum ETFs experienced somewhat larger outflows of $370 million, but this still represented just 1.23% of their AUM. These minimal movements indicate that long-term ETF holders largely avoided panic selling. Similarly, CME Bitcoin futures, a key gauge of institutional positioning, saw limited liquidations, reinforcing that traditional investors were not the driving force behind the crash.
Key Takeaways for Market Participants
This event provides crucial insights into the evolving structure of the crypto market, highlighting a growing divide.
The crash underscores that the most extreme volatility is now concentrated in the hands of crypto-native players using high leverage on less-regulated offshore platforms. For corporate treasurers, portfolio managers, and derivatives traders, this means that monitoring traditional metrics like ETF flows is no longer sufficient. It is now critical to also watch the funding rates and open interest in perpetual futures on major exchanges, as these have become key indicators of potential systemic stress.
In summary, JPMorgan’s analysis reframes this sell-off not as a broad loss of institutional confidence, but as a violent yet contained deleveraging event. The stability shown by ETFs and institutional venues suggests that the foundation of the market may be maturing, even as certain segments remain highly speculative.
