Fundstrat’s Tom Lee disclosed in a recent interview that last month’s flash event is still echoing through crypto markets, and that those ripples help explain Bitcoin’s recent slide.
According to Lee, the shock on October 10 damaged key market makers—firms that provide trading liquidity—forcing them to pull back and tighten activity.
That pullback, he said, has fed a slow drip of selling that continued into November as investors reassessed risk.
Lee pointed to a technical fault on one exchange where a stablecoin briefly lost its $1 peg amid thin liquidity and internal pricing errors.
That misquote was used by the exchange to price trades, which set off Auto-Deleveraging (ADL) events and a chain of forced liquidations across venues.
The result: several market makers saw their balance sheets weaken, and their reduced activity helped sustain selling pressure rather than absorb it.
A stronger US dollar and talk of more Federal Reserve tightening have also weighed on sentiment, making it harder for risk assets to hold gains.
Technical indicators picked up by analysts show an RSI around 25.47, which many read as oversold, while MACD readings remain in bearish mode. That mix leaves traders divided between bargain hunters and cautious sellers.
Lee argued that past episodes of forced selling tended to reverse once pressured accounts were exhausted and patient buyers reentered the market.
He suggested Bitcoin could test $77,000 and that Ether might fall toward $2,500 before any steady rebound. Based on his view, the repair of market-making systems and code fixes should stop similar cascades from repeating.
Some funds, he noted, are holding large cash positions and are waiting for clearer signs that liquidity has returned.
Investors should watch several things in the coming days: the behavior of large funds, ETF flows, and whether exchanges change how they source prices for margin events.
Reports have disclosed that when automatic systems rely too heavily on internal quotes during low-liquidity moments, risk can amplify rapidly.
Featured image from Pexels, chart from TradingView
