After reading so many explanations of what happened on October 11th, none of them addressed the key point: why liquidity completely vanished. Finally, I've found a reasonably plausible explanation.
1. The trigger was that Binance's various leverage mechanisms and collateralization had stretched capital efficiency to near-limits—large investors' accounts were on the verge of bankruptcy, driven by the influence of BETH, BSO, and USDe. Lending, on the other hand, is a form of low leverage. Whales' positions were fully liquidated, and leveraged accounts were also forcibly liquidated due to insufficient margin, leaving their pending orders and positions completely wiped out.
2. Double pressure on whale accounts: Declining collateral and position value expose them to the risk of double liquidation, as collateral also continues to decline, triggering more liquidations.
3. The impact of whale liquidations on market makers. Market makers also leverage altcoins through collateralization to maximize capital efficiency. Therefore, when prices decline, they trigger forced liquidation procedures, which in turn leads to account freezes and order cancellations, making it impossible to provide liquidity and causing pending orders to disappear.
4. After receiving liquidation instructions, liquidation bots continuously execute spot orders on the market, regardless of the depth of the order book, at the market price.
The market crash was caused by whales' greedy use of revolving loans and the unreasonable oracle pricing among the platforms. Without revolving loans, liquidations of this magnitude would not have occurred. Both the platforms and the whales who used the revolving loans are responsible for this, but they ultimately received full compensation.
The worst hit are undoubtedly the market makers and low-leverage traders who suffered the most, though current compensation rules offer little reparation. If the margin call was truly caused by market activity, then that's understandable, and they should accept the outcome. If that's the outcome, the leveraged traders may be at fault, but they're not culpable in any way.
It's like someone else made the mistake, yet they bear the greatest consequences, a devastating one at that. I think this is what many find unacceptable.