Crypto Current #97

October’s $40 billion liquidation event was a sharp reminder of how quickly crypto’s leverage infrastructure can unwind - and how fast stress can propagate in markets that operate 24/7. It also arrived at a moment when US policymakers are advancing the most consequential regulatory reforms the industry has seen, from the GENIUS Act to the proposed CLARITY Act.

This week, we examine how emerging market-structure legislation could reshape the foundations of the industry, and we revisit the mechanics behind the 10 October forced-deleveraging to understand what it revealed about the current state of crypto market structure.

What's happening in crypto?

Crypto markets are trading lower this week, in line with broader risk assets. After a short period of consolidation following October’s historic liquidation event, Bitcoin has slipped back below the $100k level. Amid the broader weakness, Uniswap ($UNI) has been a standout, rising more than 40% week-on-week after Uniswap Labs proposed activating the long-discussed “fee switch,” which would see a portion of DEX trading fees distributed to UNI holders.

DACM Insights: Jupiter’s journey from DEX to DeFi super app

In this edition of DACM Insights, we sit down with Kash Dhanda, COO of Jupiter - the largest decentralised finance (DeFi) application on Solana and one of the fastest-growing product suites in the ecosystem.

Kash shares perspectives on:

- How Jupiter maintains start-up agility while operating more than a dozen revenue-generating products.

- Why Solana’s post-FTX “trauma bond” has fostered unusually strong collaboration and developer loyalty.

- The rise of on-chain prediction markets and Jupiter’s partnership with Kalshi as the next major expansion of its platform.

You can watch the full conversation by clicking the image below.

CLARITY is the catalyst

The GENIUS Act and forthcoming CLARITY Act represent more than political signalling - they’re part of a broader shift toward regulated, scalable crypto infrastructure. Alongside proposals like the SEC’s “Project Crypto” and increasing coordination between U.S. agencies (SEC, CFTC, Treasury, OCC), these frameworks aim to bring consistency and oversight to a system that has historically operated with few formal guardrails.

Clearer regulation will change how risk is managed. Capital requirements, custody standards, leverage constraints, and reserve obligations can prevent the kind of systemic stress that emerges in loosely regulated environments. We’ve already seen early signs of this shift enabling institutional re-engagement - from the development of tokenised securities platforms to the growing stablecoin policy consensus.

This clarity is timely. As covered extensively in crypto media and shared in our recent investor communications, the 10 October liquidation event - where crypto experienced the largest forced deleveraging event in its history - was a sharp reminder of what happens when high-velocity markets operate without structural constraints. Whilst we are still experiencing market weakness from this event, the regulatory pathway being laid by the US, we believe, will provide a more constructive environment for the next phase of crypto adoption.

What 10 October revealed about crypto’s leverage infrastructure
The 10 October liquidation event - still weighing on market sentiment - offered one of the clearest demonstrations to date of how crypto’s leverage infrastructure behaves under stress. A sharp risk-off move following renewed US–China trade tensions triggered more than $20-40 billion in forced perpetual-futures liquidations across major venues. Open interest fell by roughly a third, liquidity thinned dramatically, and a broad range of tokens - particularly small-caps - saw outsized downside.

Source: Velo

What surprised many market participants wasn’t the volatility itself, but how the cascade unfolded. Crypto perpetual futures operate differently from traditional derivatives: every long must be continuously matched by a short, losses crystallise instantly, and positions are marked-to-market continuously. When liquidations accelerate faster than order books or insurance funds can absorb them, exchanges turn to auto-deleveraging (ADL) - a mechanism that closes out profitable traders on the opposite side to ensure the system remains solvent.

Many traders learned in real time that ADL is not an exotic edge case; it is a core part of how crypto derivatives are wired. The combination of high leverage, volatile collateral, and portfolios cross-margined across multiple tokens meant collateral values deteriorated precisely when traders needed them most. As insurance buffers shrank, ADL queues on some exchanges cycled through quickly, forcing profitable positions to close at market prices. On the most liquid venues, effective slippage spiked, with even small orders briefly moving markets.

Importantly, this was not an operational failure. The system behaved as designed, but it showed where crypto market structure remains fundamentally pro-cyclical. When collateral drops, liquidations accelerate… which further weakens collateral… which accelerates liquidations. The entire mechanism amplifies shocks rather than absorbing them, and because crypto trades continuously, the unwind can compress into hours rather than days.

This is where the regulatory section above connects directly. Frameworks like the GENIUS Act and the proposed CLARITY Act are not designed to prevent market sell-offs or eliminate leverage - nor should they. Their value lies in establishing structural guardrails: clearer standards for custody, collateralisation, capital requirements, and disclosure. In traditional markets, this type of infrastructure limits where leverage can build, how losses are contained, and how risk is transmitted. Crypto has lacked these protections; October offered a stark demonstration of the consequences.

The takeaway is not that deleveraging events can be regulated away, but that clearer frameworks reduce the conditions under which the most destabilising versions occur. As US market structure legislation advances, we expect the next generation of exchanges, stablecoin issuers, and derivatives venues to take shape under more predictable constraints - helping the ecosystem migrate away from the most fragile forms of leverage.

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Established in 2017, DACM is an institutional investor focused on the digital asset sector. Our team invest across the digital asset sector, from early-stage venture partnerships to listed and derivative markets. DACM has developed a fundamental investment philosophy designed for family office and institutional investors, tested across multiple market cycles.

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