Tom Lee Flags Crypto Liquidity Crisis Amid Market Maker Woes

The October Liquidation Shock

On October 10, 2025, the crypto market faced a record $20 billion liquidation event that wiped out leveraged positions across exchanges. This cascade, triggered by sudden volatility, led to Bitcoin plunging from a high of $126,080 on October 6, 2025, to around $85,848 by November 21, 2025, according to CoinGecko. Ethereum followed suit, dropping from peaks above $4,700 in early October to $2,795 on the same date.

The event marked the largest single-day wipeout in crypto history, with over 1.6 million traders affected. This sharp decline erased much of the year’s gains, pushing Bitcoin into negative territory for 2025 and highlighting fragility in leveraged trading.

Market Makers Pull Back, Liquidity Dries Up

Tom Lee, co-founder of Fundstrat Global Advisors and chairman of BitMine, attributed the ongoing price pressure to a crypto liquidity crisis stemming from market makers’ balance sheet holes. In a November 20, 2025, CNBC interview, Lee explained that these firms, which provide buy-sell quotes to facilitate trading, suffered heavy losses in the October crash. To recover, they have shrunk operations, freed up capital, and reduced market exposure.

To me, the weakness in crypto has the all the signs

– of a market maker (or two) with a major “hole” in their balance sheet

Sharks circling to trigger a liquidation / dumping of prices $BTC

Is this pain short-term? Yes

Does this change the $ETH supercycle of Wall Street… pic.twitter.com/0jfkXYnfv9

— Thomas (Tom) Lee (not drummer) FSInsight.com (@fundstrat) November 15, 2025

This pullback has created a cycle of lower liquidity, higher volatility, and forced sales, causing a steady downward drift in prices over the past six weeks. Lee compared it to a 2022 liquidity crunch that resolved in about eight weeks. With the current issue now at the six-week mark, he suggested stabilization could occur in a couple more weeks. Independent analyses from Kaiko and Rosenberg Research confirm reduced market depth, with Bitcoin’s liquidity dropping from $766 million in early October to $535 million recently.

BitMine Bets Big on Ethereum Despite Volatility

Amid the turmoil, BitMine has ramped up its Ethereum acquisitions, viewing the dip as a buying opportunity. The company added 17,242 ETH worth $49 million in a recent purchase, bringing its total holdings to 3,559,879 ETH as of November 16, 2025, per an SEC filing. Valued at over $10 billion at recent prices, this represents about 2.9% of Ethereum’s 120.7 million circulating supply.

BitMine funds these buys through equity sales, cash reserves, and staking rewards on platforms like FalconX. Lee, in his chairman role, has set a goal of holding 5% of Ethereum’s supply, signaling long-term confidence. This strategy contrasts with the short-term liquidity strain, as the firm accumulates during weakness.

The crypto liquidity crisis underscores broader market risks, but signs point to potential recovery once market makers rebuild. Prices remain volatile, with Bitcoin down 32% from its October high and Ethereum off 40%. Investors watch for liquidity improvements in the coming weeks.