Crypto Crash Exposes Major Balance Sheet Gaps, Says BitMine Chair

The recent crypto market downturn may result in deep holes in the balance sheets of major market makers, according to BitMine’s Tom Lee. In an interview with CNBC on Thursday, Lee said the sharp fall on October 10 appears to have caught several trading firms off-guard. This has left them short on the funds needed to keep markets steady.

Lee noted that these firms rely heavily on active traders as their main source of income. When crypto traders step back during a sharp move, firms are left with less cash to run day-to-day operations. That shortage has pushed them to scale down their balance sheets even further to free up whatever cash they can.

“They’ve got a hole in their balance sheet that they need to fill,” Lee said. “To do that, they have to cut activity. If prices fall, that forces even more selling, and that cycle has been dragging on for weeks.”

Ongoing Strain on Market Makers

Lee compared the role of market makers in crypto to the function played by central banks in traditional finance. He called them essential for keeping trading smooth during periods of stress. 

The executive warned that the market may face a bit more pain before conditions begin to settle, as these firms work through shortages. He said the stock market showed the same pattern on Thursday, though the earlier shock on October 10 was far more severe. “

That liquidation was so large that it [affected] market makers,” he said. Their reduced activity since then has contributed to uneven price action across digital assets.

Bitcoin surged above $121,000 before this major drop but has since fallen to around $86,900. Other top altcoins have tracked the same downtrend.

Comparing Today’s Crypto Cycle With 2022

Lee pointed to a similar episode in 2022, when firms needed roughly eight weeks to work through their shortfalls. He said the current phase has lasted about six weeks, suggesting that a return to calmer crypto trading may still be far.

He added that Bitcoin and Ethereum often act as early indicators for broader markets, with this year’s slow recovery reflecting the same pattern. Until balance sheets stabilize and firms regain the capacity to support trading at full strength, price swings may continue to unsettle investors.