On The Brink with Castle Island Weekly Roundup 10/17/25 (Flash crash, pig butchering scam busted, Erebor charter granted) (EP.678)
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Oct 17, 2025 This week dives into the aftermath of a flash crash triggered by tariff news and its effects on crypto markets. The hosts dissect Binance's role and the auto-deleveraging phenomenon that intensified the selloff. They highlight the alarming $15 billion Bitcoin seizure linked to pig butchering scams, shedding light on the human cost behind these scams. The conversation also touches on the recent approval of Erebor’s OCC charter and the potential impact of new crypto banks on traditional finance, raising questions about regulatory dynamics.
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Fragmented Liquidity Amplifies Flash Crashes
- Crypto's fragmented exchanges create isolated liquidity pools that amplify crashes and liquidations.
- Rebuilding clearinghouses and market-wide risk mutualization will reduce these flash-crash dynamics.
Internal Exchange Pricing Can Mislead
- Exchange internal pricing can trigger cascading liquidations when used for reference rates.
- Trades that look extreme on one venue may reflect local order-book failures, not market-wide value.
Retail Leverage Created Systemic Kindling
- Retail leverage and easy access to high-margin derivatives created combustible leverage across venues.
- Many traders lacked experience with ADL and extreme dislocations, worsening the crash impact.