Tom Lee Sounds Alarm on Crypto Liquidity Squeeze After Epic October Crash
- On October 10, 2025, the crypto market lost a record $20 billion in liquidations, which affected almost 2 million accounts.
- It will take 6 to 8 weeks for balance sheets to heal, and there may be peaks in 2026 because of tokenization.
Tom Lee, a smart strategist at Fundstrat Global Advisors, has brought attention to a major problem that is shaking the crypto world. After the crazy market crash on October 10, 2025, he warns that a lack of cash is making trading very hard.
That’s what happened when automatic liquidations started, which took about $20 billion out of the crypto market. Almost two million trading accounts were affected. There was more than just a dip; it was a full-blown panic sell-off.
Lee says that big trading companies, which act as the market’s safety net by providing liquidity, took huge losses. These “market makers” are like crypto central banks. When they lose money, they stop giving tight quotes and start selling off assets to balance their books.
Markets run smoothly when there is liquidity. Prices go up and down a lot, spreads get bigger, and buying and selling gets messy without it. Lee calls this a “crypto QT,” which is like quantitative tightening on steroids and is much worse than what the Federal Reserve does.
