Why Is Crypto Crashing? The Usual Causes, Explained With Past Crashes

On 7 and 8 October 2026, crypto markets slid after minutes from the US Federal Reserve’s September meeting signalled another interest-rate rise, and CoinGlass data recorded about $713 million in liquidations over 24 hours. Crashes like this keep recurring in crypto, and they almost always trace back to the same handful of causes: tighter monetary policy, forced liquidation of leveraged trades, exchange failures, stablecoin depegs, hacks and regulation news. This page explains each cause, works through the past crashes with dates and numbers, and sets out what users can actually do. It sits within our coin directory.

What actually causes crypto to crash?

Crypto crashes rarely have a single cause. They are usually a chain: a trigger such as a central-bank decision, a hack or a solvency scare pushes prices down, and that first drop forces leveraged traders out, which pushes prices down further. The six recurring drivers are macro and interest rates, leverage liquidations, exchange failures, stablecoin depegs, hacks and regulation news, and one crash often combines several of them.

Macro and interest rates

Higher interest rates make holding a volatile, zero-yield asset less attractive than cash or government bonds, and they drain liquidity from risk markets at once. The September 2026 example is clean. The Federal Reserve’s 15 to 16 September 2026 meeting raised the federal funds target range by a quarter point to 3.75 to 4.00 percent, and the minutes published on 7 October said most participants expected another increase before year end. Bitcoin and Ethereum began sliding the next day, and US spot Bitcoin ETFs saw about $484.9 million in net outflows on 7 October as institutional holders trimmed exposure. We explain how those funds work in our spot Bitcoin ETF guide. The 2022 pattern was the same: the Federal Reserve raised rates by half a percentage point on 3 May 2022, and Bitcoin fell about 27 percent over the following eight days.

Leverage liquidations

Derivatives exchanges let traders borrow to open positions many times larger than their deposit. When the price moves against a leveraged position, the exchange closes it automatically to protect the lending pool, and that forced sale is a liquidation. Because a liquidation is itself a sell order, a falling price triggers more liquidations, which pushes the price lower again. In the 24 hours ending on the morning of 8 October 2026, CoinGlass data showed about $713.2 million in liquidations, with long positions making up about $651.2 million of it, roughly 91 percent.

Exchange and lender failures

When a large exchange or lender collapses, customers can lose access to funds and the market reprices the risk of leaving coins on any platform. FTX is the defining case. On 2 November 2022, CoinDesk reported that Alameda Research’s balance sheet was built heavily on FTT, the token of its sister company FTX. Customers rushed to withdraw, and FTX filed for Chapter 11 bankruptcy on 11 November 2022. The SEC later charged co-founder Sam Bankman-Fried with defrauding investors by concealing the diversion of customer funds to Alameda. Bitcoin fell from the low $21,000s to $15,480 on 22 November 2022. We cover the failure and the ongoing repayments in our FTX collapse explainer.

Stablecoin depegs

Much of the market’s trading runs through dollar-pegged stablecoins such as USDT and USDC. When one loses its peg, it can force selling of the assets that back it or that are paired with it, and it shakes confidence in the wider ecosystem. In May 2022 the algorithmic stablecoin TerraUSD, known as UST, depegged and collapsed together with its sister token LUNA; the SEC said the episode wiped out about $40 billion in market value nearly overnight. The distinction between collateralised and algorithmic stablecoins is why the collapse mattered, and we explain it in our USDT vs USDC vs DAI comparison.

Hacks and exploits

Theft can knock confidence out of the market even when the exchange, not the user, is the victim. In January 2018 the Japanese exchange Coincheck reported the theft of about $530 million of the NEM token, one of the largest thefts of that era, and it fed the wider 2018 bear market. More recent exchange attacks are covered in our Binance hot-wallet attack explainer. Hack news matters directly to users too, because a high-profile theft is exactly when fake compensation pages and phishing links multiply.

Regulation news

Regulatory announcements move prices because they can change whether a token may be traded, held or offered in a given market. China’s repeated payment bans in 2021 coincided with a sharp selloff that May, and the SEC’s action against Ripple Labs over XRP, filed 22 December 2020, is one reason XRP has carried its own regulatory overhang since; we cover that case in our Ripple explainer. The common thread is surprise: a confirmed change in legal status reprices a coin quickly, while a widely expected decision often barely moves it.

How does a leverage cascade turn a small dip into a crash?

A leverage cascade is a loop. A price drop forces an exchange to sell a leveraged trader’s position, that forced sale pushes the price lower, and the lower price triggers the next round of forced sales. Because most liquidated positions in a down-move are longs, the cascade feeds on itself until the over-leveraged positions are cleared out.

1. Borrow. A trader deposits, for example, $100 and opens a 10x long, controlling $1,000 of Bitcoin. At ten times leverage, a 10 percent move in the wrong direction wipes out the whole deposit.
2. Margin call. As the price falls, the position loses value and nears the exchange’s minimum margin. The trader can add collateral or be closed out.
3. Liquidation. The exchange force-closes the position, selling the Bitcoin at whatever price it can get. That sale is a liquidation, and it adds sell pressure.
4. Cascade. The extra sell pressure pushes the price lower, which liquidates the next tier of leveraged longs, and so on. This is why a small dip can snowball into a sharp crash.
5. The October 2026 example. In the 24 hours to the morning of 8 October 2026, CoinGlass recorded about $713.2 million in liquidations, roughly $651.2 million of it in longs. Bitcoin fell about 4.2 percent, from $86,592 on 6 October to $82,952 on 7 October, as the flush unfolded.

The same leverage that amplifies gains on the way up accelerates losses on the way down, which is why sharp crypto moves routinely overshoot in both directions. You keep yourself out of step three simply by not trading on margin, or by using far less leverage than an exchange offers; a spot purchase, where you own the coin outright, cannot be liquidated.

How big were the past crashes?

Bitcoin’s worst drawdowns include an 84 percent fall from December 2017 to December 2018, a more than 39 percent single-day drop in March 2020, a slide from a November 2021 peak near $67,600 to $15,480 in November 2022, and a fall of about 40 percent from its October 2025 record close to a later 2026 low. Each had a different trigger.

The figures come from the sources linked in the timeline below: the 2018 and 2021 peaks, the March 2020 low, the November 2022 trough, and the October 2025 record close and 2026 low.

The pattern across all four episodes is the same: an external trigger, then forced selling, then contagion. The 2018 bear market was an unwind of the 2017 initial-coin-offering bubble, helped along by the Coincheck hack and bans on crypto advertising. March 2020 was a global flight to cash during the COVID-19 selloff. 2022 was two failures in sequence: first Terra’s stablecoin, then FTX. The 2026 slide was a macro and leverage flush with no hack or exchange failure behind it, which is why it unfolded in waves rather than one collapse. How Bitcoin’s own supply schedule, halvings and fees interact with these cycles is covered in our Bitcoin explainer.

Why do altcoins fall harder than Bitcoin?

Altcoins usually fall more than Bitcoin in a crash because they are smaller, less liquid and more dependent on borrowed leverage. When traders rush to safety, they sell riskier tokens first, and thinner order books mean the same selling pressure moves the price further. In the 7 to 8 October 2026 selloff, Bitcoin fell about 4.2 percent while several smaller altcoins fell by a larger margin.

The reason is mechanical. Bitcoin has the deepest order books and the largest base of institutional demand, including the spot ETFs. Smaller coins have thinner books, so the same dollar of selling moves the price further, and they carry a higher share of leveraged perpetual positions, which means more forced selling once a cascade starts. This is why a market-wide crash rarely hits all coins equally, and why the calmest way to watch one is in assets you actually understand.

Will crypto recover after a crash?

History says crypto has recovered from every major crash so far, but never on a fixed schedule. After the 2018 crash Bitcoin did not reclaim its record until November 2020, and after the 2022 collapse it took until 2025. A past recovery is not a promise that any future decline will be reversed.

Recovery has looked different each time. After the March 2020 crash, Bitcoin was back around $13,200 by October 2020 and above its previous record by November 2020, a recovery measured in months. After the 2018 bear market, which cut about 84 percent off the price, it took roughly three years to make a new high. After the 2022 collapse, Bitcoin bottomed at $15,480 in November 2022 and did not set a new all-time high until 2025.

What decides whether a recovery happens is not the size of the fall but the cause. A liquidity or leverage event, such as March 2020 or October 2026, tends to clear quickly once the forced selling finishes. A structural failure is different, and some assets never came back: LUNA went to near zero, and FTT, the token at the centre of the FTX collapse, never recovered. Assets with no single issuer, such as Bitcoin and Ethereum, have historically recovered, but the word historically is doing the work, and no one can guarantee the next one.

It is worth separating two questions when you read crash coverage. Will crypto recover is a question about the asset class, and the answer so far has been yes. Will my specific coin recover is a different question, and it depends on whether that coin and its issuer still exist and are solvent. Past performance of the asset class does not predict any individual token. Crypto assets are volatile, and this page is information, not financial advice.

What should users do now?

A crash is when many users actually lose money, but usually through panic, leverage or phishing rather than the price move itself. The practical steps are to hold only what you can afford to lose, move coins you are not trading into self-custody, avoid or reduce leverage, and treat any urgent or compensation message during a crash as a probable scam.

1. Only risk money you can afford to lose. A crash is the wrong moment to discover you cannot. If a coin going to zero would hurt you financially, the position was too big before the crash started.
2. Move long-term holdings off exchanges. Coins you are not actively trading do not need to sit on an exchange, where they are exposed to a platform failure like FTX. See our guide to moving crypto from an exchange to a wallet.
3. Secure your seed phrase before you need it. If you self-custody, your recovery phrase is the only way back into your funds. Write it down offline and never share it or type it into a website; our seed-phrase guide walks through how.
4. Avoid leverage, or use far less of it. The 7 to 8 October 2026 selloff liquidated about $713 million in 24 hours, roughly 91 percent of it leveraged longs. A spot holding cannot be force-sold; a leveraged position can.
5. Treat phishing as the active threat it is. During and after a crash, fake withdraw-your-funds-now pages and compensation forms multiply, often after a real hack such as the Binance hot-wallet attack. Only use the official vendor domain, and never enter a seed phrase anywhere.
6. Check reserves if you stay on an exchange. Some exchanges publish proof-of-reserves reports that show whether customer assets are actually backed. Our proof-of-reserves explainer shows how to read them.
7. Slow down. Crashes end, and the decisions made in a panic are usually the expensive ones. There is no deadline to act during a crash, but there are plenty of scams pretending there is.