What Actually Broke: The Leverage, Not the Fundamentals

The last two months shook a lot of people.

Prices dropped fast. Some assets fell thirty to fifty percent in a single day. On the surface, it looked like the whole market was collapsing.

The truth is much simpler.

Nothing fundamental broke.

The leverage sitting on top of the market broke.

And once you understand that, the entire crash makes sense.

What Actually Happened: A Leverage Unwind, Not a Crypto Failure

Heading into October, traders were taking on extreme leverage across major exchanges. Open interest kept climbing. Funding rates were stretched. People were using borrowed money to push up asset prices.

Then the system reset.

A pricing error on one venue triggered margin calls.

Those margin calls triggered forced liquidations.

Liquidations pushed prices down.

Lower prices triggered more liquidations.

This happened across BTC, ETH, SOL, AI tokens, L2 ecosystems, and DeFi.

Not because something was wrong with the tech, but because the leverage had to clear.

Perpetual volumes have been skyrocketing

Crypto has quietly become an ecosystem powered by leverage. Perpetual futures dominate trading volume, and the growth over time is obvious once you see it visually.

Perpetual liquidations go boom

When perps liquidation volume spikes like this, you get waterfall price action. These are forced exits. They’re not real sellers. They’re margin systems doing what they are programmed to do.

Open interest collapsed across major assets

This shows billions of dollars of synthetic exposure disappearing in days. It is exactly what a leverage unwind looks like.

The fundamentals stayed intact.

The leverage did not.

Our Position on Leverage

Digital Wealth Insider and our flagship product CryptoBull Capital does not use leverage.

Not because we are conservative. Because the technology is still young.

Blockchain markets are built on:

• imperfect infrastructure

• evolving oracle systems

• automated liquidation engines

• thin liquidity during stress

• programmatic risk logic that does not pause when markets break

Most people underestimate tail-end risk in crypto.

A single oracle misprint, latency issue, or liquidity pocket can trigger billions in forced liquidations in minutes.

Not because anyone “sold,” but because code executed.

In traditional markets, humans intervene.

In crypto, machines liquidate.

That is why black swan events here are sharper and more frequent than in any other asset class.

Leverage amplifies gains in good times, but it destroys portfolios during resets like this.

If you cannot survive a structural flush, you never live long enough to capture the next expansion.

Our entire approach is built around staying alive through these stress events, not trying to engineer returns with borrowed exposure.

Survival is a strategy.

Leverage is not.

Why It Continued Into November

Even after the initial shock, the system was still unstable.

Funding remained negative.

Liquidity stayed thin.

Market makers pulled back.

High OI sectors saw additional forced selling waves.

Nothing new broke.

The system was simply flushing out what was left of the leveraged positions.

This is why price continued falling even though the underlying networks and usage did not.

Why This Crash Felt Disconnected From Reality

People kept saying the same thing:

“Why is everything going down if the fundamentals look fine?”

Because during a leverage unwind, fundamentals do not matter in the short term.

Forced sellers do not care what something is worth. They sell because the system forces them to, not because their investment thesis changed. That is why price can fall even while adoption grows.

What Always Comes After A Reset Like This

Every major crypto cycle has these clearing events.

March 2020

May 2021

FTX in 2022

Now October–November 2025

A leverage reset cleans the slate. After that, the market is healthier:

Cleaner positioning, more room for real buyers, and a better long term risk reward.

There’s less froth and less forced selling risk.

This environment has historically been where disciplined investors outperform emotional ones.

What Did Not Break

This is the part most people miss. While prices fell:

Stablecoins expanded

Tokenization grew

Revenue stayed meaningful and in an uptrend

The rails did not crack.

They strengthened. This is not what a broken ecosystem looks like.

This is what a leveraged ecosystem looks like when it resets.

So What Now

We now have:

Cleaner markets, no leverage overhang, a much healthier positioning.

Valuations are at multi month lows. Sentiment in Fear and moving toward Neutral

Major adoption trends that did not slow down Fundamentals that are stronger than before the crash

If you believe in this space long-term, this type of reset is not a warning sign.

It is an opening.

If you have capital ready, this is often when the best entries appear.

Not because you are trying to time the bottom, but because the entire system is healthier after leverage clears.

More soon.

Mike

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Disclaimer:

This content is for informational and educational purposes only and should not be construed as investment, legal, or financial advice. Nothing in this newsletter constitutes a solicitation, recommendation, or endorsement of any investment strategy or protocol. Digital assets are highly volatile and carry risk. Always do your own research and consult with a licensed advisor before making financial decisions.