October 2025 in Crypto: A roller coaster ride

The Debasement Trade

Uptober was certainly a roller coaster of a ride and somewhat of a misnomer this year. Things started off strong for digital assets with Bitcoin hitting a new all-time high of $126,000 on October 6. Helping to fuel the rally, which propelled our benchmark Top10 Crypto CTI higher by 10%, was increased anxiety that governments will be unable to rein in their borrowing via either tax increases or spending cuts and ultimately resorting to the printing press to avoid default – a longstanding crypto narrative that, courtesy of tradfi giant JP Morgan, now has a name: the debasement trade.

Such reasoning may be very familiar to long-time crypto holders, but recent political turmoil, such as the US government shutdown (now in its 30th day – a longer period of time than had been originally anticipated by prediction markets) and the resignation of the French PM after less than 26 days in office¹, has reinforced concerns about fiscal stability, meaning the narrative is starting to resonant with a broader investor base. What has also helped is that it is not just crypto degens pushing the debasement narrative, respected tradfi investors like Ray Dalio (Bridgewater), Ken Griffin (Citadel) and Paul Tudor Jones (Tudor Investment Corporation) all echoed similar warnings last month.

Record Wipe Out

Unfortunately for the bulls, the strong start was torpedoed by an unlikely source: US President and crypto convert Donald Trump. Unexpectedly (with perhaps a notable exception or two – see below), Trump announced he was considering an additional 100% tariff on Chinese imports in response to China placing export controls on rare earths, a market China has a stranglehold over given it mines at least 60% of the global total and processes about 90% and which are a critical component in many hi tech products – see image.

Source: X (via @KobeissiLetter)

The reawakening of trade war fears that plagued investors earlier in the year caused a surge in risk aversion that not only hit digital assets but all risk assets hard. The global market cap of digital assets dropped by $400 billion – the largest one day drop ever recorded – as a liquidation cascade saw around $20bn leveraged long positions wiped out, resulting in double digit percentage point price drops for many tokens. As a result, our Top10 Crypto CTI finished the month, down 10%. Similarly, Wall Street closed the day of the announcement firmly in red with $2 trillion in market value wiped from US stocks alone.

Dialling Down The Rhetoric

To cooler heads, the extent of the sell-off triggered by Trump’s threat was extreme. After all, this is a person known for his tough negotiating style. Indeed, as I wrote a few months back:

“President Trump revels in being considered a tough and successful negotiator, so much so that he named his 1987 bestseller “The Art Of The Deal”. Given this, it is perfectly plausible to assume that by announcing large and widespread tariffs – at the risk of triggering Great Depression 2.0 – Trump deployed military style “shock and awe” tactics to bring other nation states to the negotiating table with the intention of getting them to remove the pre-existing trade impediments on US exporters in return for being exempt from US tariffs.”

Lo and behold, before the weekend was over Trump softened his tone on social media posting:

Source: Truth Social

Mirroring this more conciliatory stance, US Treasury Secretary Scott Bessent said the US was in talks with China, including staff level talks during the annual World Bank and IMF meetings, about how to de-escalate a trade war. While this softer tone provided investors with some reassurance², the damage to market sentiment was already done as evidenced by the crypto Greed and Fear index moving from Greed to Extreme Fear in under a week.

Ethena Depeg?

One casualty of the deleveraging event was USDe – Ethena’s stablecoin – which dropped to $0.65 on Binance. While the price drop appeared to indicate that USDe had depegged – not a good look for a token whose price is supposed to be, well er stable – in reality the price drop only occurred on the Binance trading platform, elsewhere USDe stayed around parity. According to various sources, manipulators exploited Binance’s Unified Account margin system, which values collateral tokens (including USDe) using its own spot market rather than oracle data, a known vulnerability that was fixed on October 14³.

Having conducted a “comprehensive review” of the event Binance concluded that the turbulence was primarily attributable to the macroeconomic shock from the Trump tariff threat and not system failures internal to the company. However, it did acknowledge that “some platform modules briefly experienced technical glitches, and certain assets had de-pegging issues due to sharp market fluctuations” and decided to compensate impacted users of their platform to the tune of $283 million in token vouchers, an amount that raised some eyebrows in the crypto community – see image.

Source: X

Insider Trading Speculation

Additionally, there was speculation that insider trading had exacerbated the crash. Suspicions were roused after it was revealed that a trader on the decentralized exchange Hyperliquid opened large leveraged short positions in Bitcoin and Ether just 30 minutes prior to the Trump tariff announcement. As the market tanked over the next several hours, these positions generated profits totaling almost $200 million.

Given the uncanny timing of the trades, some suspected the wallet could belong to Barron Trump, the youngest son of the President, who according to a recent Forbes article has built up an estimated $150 million crypto fortune. However, focus quickly shifted to Garrett Jin, CEO of the now-defunct crypto exchange Bitforex, after blockchain researchers noted a link to the wallet that conducted the trades. In response, Garrett tweeted that it was one of his clients who was behind the trade and that he only provided insights. He also tweeted that he has no connection with the Trump family. Just extremely lucky it would seem!

The Danger Zone

One of the questions prompted by the record crypto sell-off was whether it implies the top is in for this cycle? Lending weight to this idea was a post doing the rounds on X containing an image posted back in 2023 predicting that the next all-time high for Bitcoin would occur on October 6, 2025. Spooky or what?

Source: X

Nostrodamus-like prophecies correctly forecasting market tops and bottoms to the very day years in advance are certainly attention grabbing (and extremely profitable if true). Unfortunately, the dates do not line up quite as precisely as the post suggests, as illustrated in the table below, which details Bitcoin cycles going back to early 2011. The three bull markets each lasted just over 1,000 days with a 50-day window between the shortest and the longest. Such a narrow time window implies a high degree of temporal regularity to crypto cycles (albeit not as precise as the tweet), but it must be acknowledged that we are talking about a sample size of three, which is hardly a large statistically robust number.

Bitcoin Cycles (Peaks and Troughs)

Source: Author calculations

Nevertheless, given the current bull market started on November 21 2022, 1,050 days prior to the October 6 high, we are, in some sense, in the crypto danger zone. The question crypto investors must ask themselves at this juncture is whether the historic four year cycle over or not?

A Break From The Past

Personally, I consider there to be very solid grounds for thinking that underlying market dynamics have changed to an extent that such cyclical patterns have been corrupted. The primary reason is that this cycle has seen a great deal of institutional interest, whereas previous cycles were more retail driven. Such entities are not interested in quick speculative punts on the market in the hope of making a quick buck. Instead, they are seeking to build long-term profitable businesses based on a superior blockchain tech stack compared with legacy tradfi infrastructure, which makes them much less flighty. Moreover, it must be remembered that the tradfi embrace of crypto has only been made possible by the introduction of greater government regulation and oversight, legislation that reduces (albeit perhaps not fully remove if the aforementioned insider trading suspicions are valid) the propensity for participants to manipulate the market, which almost certainly occurred in prior cycles.

A further reason for thinking that there is still longevity to the current bull cycle is the absence of rampant investor bullishness, which is what typically marks major market tops. Indeed, looking at the google trends data, web searches for the phrase “Bitcoin” are well below the peaks seen during the two previous bull market peaks, indicative more of investor neutrality than excitement – see chart.

Bitcoin Worldwide Search Count

Source: Google Trends

Finally, and most pertinent in my view, the underlying macroeconomic backdrop remains supportive for finite supply crypto assets like Bitcoin. Government debt levels remain at post war highs and there is no serious attempt to implement fiscal consolidation in the form of public spending cuts in any of the major economies. Critically, central banks are easing not tightening monetary policy, as was the case in early 2022 when the last bear market started. This means cyclical and structural forces are aligned and pushing in the same direction – and that direction is up. The debasement trade lives on!

What’s DAT?

While remaining firmly in the crypto bull camp, no asset price goes up forever, that’s not how financial markets work. At some stage the bear will return, it is inevitable. Very often the seeds of the bear market are sown in the latter stages of the bull market. In this regard, one area where I and the rest of the Trakx team have begun to focus on is Digital Asset Treasuries (DATs). DATs are companies that hold a significant portion of crypto on the asset side of their balance sheets.

The key advantage of DATs is they provide a way for institutional investors to gain exposure to digital assets when their investment mandates do not permit them to hold digital assets directly. For example, fixed income funds can own the bonds issued by DATs or equity-only funds can own preferred shares of DATs, both of which provides the capital necessary to purchase the underlying crypto.

Such has been their success that there are now 108 public companies globally that hold Bitcoin as part of their treasury reserves, in addition to the 20 or so government institutions that also hold the seminal cryptocurrency. Collectively, they account for about 1.5 million BTC, or just over 7% of Bitcoin’s total supply, not exactly a small number.

The most famous of all DATs, and the one that is the largest public Bitcoin treasury holder, is Michael Saylor’s Strategy Inc. (formerly MicroStrategy). Set-up in 1989 as a business intelligence/analytics software company MicroStrategy publicly listed on the NASDAQ in 1998. However, the company pivoted in August 2020 when it adopted a Bitcoin treasury strategy and began purchasing it as a means to preserve capital against inflation.

Over subsequent years, Strategy has continued accumulating Bitcoin aggressively using stock issuance and debt instruments (convertible notes and dividend paying preferred shares) to raise capital for ongoing purchases. Certainly, Strategy’s, er strategy, has proved attractive to investors, given the company presently has over 640,800 Bitcoin on its books, which equates to approximately 3% of total Bitcoin supply and is valued at current market prices at $47bn – see image. As a result, Strategy is now the world’s 200^th most valuable company and the fifth largest corporate treasury after Berkshire Hathaway, Amazon, Alphabet and Microsoft. Quite the success story.

Strategy Inc. Bitcoin Holdings (BTC)

Source: BiTBO

In the hope of mirroring this success, other company’s have begun replicating Strategy’s business model, with Marathon Holdings, XXI Century Inc, Metaplanet Inc. and the Bitcoin Standard Treasury Company, the next four largest corporate Bitcoin treasuries, albeit each with bags roughly 10X smaller than Strategy’s.

While Bitcoin was the first, and remains the most popular choice, it is not the only cryptocurrency that DATs own. Ethereum is another popular choice, with combined DAT holdings of ETH 5.7 million, which equates to around 4.7% of supply – see image.

Misconceptions And Risks

When purchasing the financial instruments of DATs, some investors (hopefully not all!) may be under the impression that they are purchasing the underlying cryptocurrency, but that is not the case. Rather they are buying equity in the company itself meaning ownership of a proportional claim on the company, not its individual assets. Similarly, purchasers of say Strategy Inc. convertible bonds do not own the Bitcoin bought by the companies even though they provided the capital necessary to make the purchases (as highlighted here).

Instead what the investors are getting is a high yield return if they purchase the convertible bonds (between 8-10% annually, which is well in excess of the returns on government bonds plus the perceived value of the option to subsequently convert into shares of the company) or leveraged financial exposure to the price movements Bitcoin if they buy equity. This leverage comes from the fact that in the event of the crypto asset they own (Bitcoin or Ether) gaining value, the increase in the value of the company’s total assets accrues to the equity holders not the debt holders. Obviously the flipside of this is that if the price of Bitcoin falls, this leverage works against equity holders. This is why the stock price of DAT’s are more directionally volatile than the underlying crypto price.

It is also important for investors to appreciate that Bitcoin is not a cashflow generating asset (Ethereum is different in that it can generate a staking yield following the blockchain’s transition from Proof-of-Work to Proof-of-Stake – AKA the 2022 Merge), so where does the money come to pay the yields offered to convertible bond holders? In Strategy Inc. case there are two main sources. First, its core software analytics business which generates around $500 million in revenue every year, which is more than sufficient to cover the $35 million annual interest burden. Second, additional ATM (at-the-market) equity sales that can be used either to purchase additional Bitcoin or held in fiat – a liquidity buffer that covers interest payments between financing rounds.

Given Strategy’s non-crypto related income more than covers the amount it must pay out to its bond holders, the set-up that Saylor adopted is fairly robust in the event of a crypto bear market⁴, at least for the holders of its bonds (equity holders are a different matter). This may not apply in the case of the other DATs. For example, the primary revenue stream of Marathon Holdings – the second largest Bitcoin DAT – comes from Bitcoin mining. This revenue stream provides some safety to bond holders due to the Bitcoin protocol’s fortnightly difficulty adjustment, which decouples mining profitability from the price of Bitcoin, but it is not a fully uncorrelated income stream.

The most precarious though are DATs which have no non-crypto related income streams because in the event of a fall in the price of the digital assets they hold, the easiest way to raise the funds necessary to cover the interest payments to their bond holders will be to sell the underlying holdings.

There is nothing intrinsically flawed with DATs, indeed they provide a new vehicle for investors to gain exposure to digital assets, but the risk associated with them very much depends upon how well they are structured. Our concern is as the crypto bull market matures, less rigorous standards will be applied to the way DATs are designed (just like lending standards were relaxed during the 2000-2007 US housing bubble). And, maintaining the US housing parallel, when the cycle does eventually turn, forced selling could exacerbate the move down because this is the fuel that feeds every major financial asset bear market. We may not be at that point currently, but it is a risk that deserves closer scrutiny.

1 In a surprise move Lecornu was reinstated as PM days later and while he survived two no confidence votes it was only after he agreed to suspend raising the retirement age from 62 to 64 – a significant concession that will further increase French public spending – see: https://www.theguardian.com/world/2025/oct/16/french-prime-minister-sebastien-lecornu-survives-two-no-confidence-votes

2 Towards the end of the month, digital prices rebounded once it became clear that a deal would be done – see: https://trakx.io/resources/weekly-update/crypto-comeback-october-27-2025/

3 Binance announced on October 6 that the fix was coming a week later, which gave the manipulators a window of time by which to conduct the exploit.

4 The average price of Strategy’s purchases comes in just under $74,000 – see: https://www.strategy.com/purchases.