Oracle and Leverage Failures Implicated in Crypto Market 'Reset' Discussed on Laura Shin's 'Bits + Bips'

Laura Shin's "Bits + Bips" podcast recently provided an in-depth analysis of a significant "reset" within the cryptocurrency market, with an episode released around October 20, 2025. Titled "> Crypto Had Its Reset. How Long Will It Take To Climb Back?", the discussion featured experts Steven Ehrlich and Ram Ahluwalia, who dissected the intricate factors leading to the market downturn. They highlighted a "perfect storm" where oracle malfunctions combined with excessive leverage, causing widespread disruption across the crypto ecosystem.

The podcast specifically pointed to the depegging of the USDe stablecoin on Binance as a critical event that exacerbated the market's instability. Ram Ahluwalia suggested that this incident bore the characteristics of a potential "zero-day hack," contributing to the broader financial turmoil. The experts further elaborated on how this environment led to both long and short positions being "wrecked," underscoring the failure of perpetual contracts as effective hedging instruments during the crisis.

A central tenet of the "Bits + Bips" episode was the urgent call for the crypto industry to draw vital lessons from traditional finance (TradFi). Ehrlich and Ahluwalia noted "eerie parallels" to a flash crash that occurred in U.S. equities approximately 15 years prior, emphasizing the destructive role of systemic leverage in amplifying market declines. They advocated for the immediate implementation of a comprehensive market structure bill to fortify the nascent digital asset space against future shocks.

The discussion also touched upon severe liquidity issues that plagued the market during the reset, characterized by "huge spreads and no liquidity," raising concerns about the preparedness of market makers. While acknowledging the substantial damage, the experts offered a cautious outlook on the recovery timeline, suggesting it would take considerable effort and time for the market to fully rebound and for necessary structural changes to be implemented.