London-based Nickel Digital Asset Management writes that it saw its proprietary risk management system (RMS) undergo one of its most significant live stress tests during October’s flash crash.
October 2025 delivered the largest liquidation event in digital asset history, with approximately USD20 billion in leveraged positions wiped out — compared to around USD2 billion during the collapse of FTX.
The firm writes that the sudden, sharp sell-off followed President Trump’s threat of new tariffs on Chinese imports. As this happened outside opening hours of equity markets, crypto, as the market operating 24/7, came under global selling pressure driven by derisking behaviour. Within hours, Bitcoin fell 9 per cent, Ethereum dropped 12 per cent, UNI plunged 52 per cent, and AAVE sank 66 per cent.
Nickel Digital’s Diversified Alpha Fund — a multi-manager vehicle allocating to external pod managers specialising in non-directional strategies — saw its RMS monitor a 10-fold surge in trading activity as managers sought to capture dislocations. More than USD2 billion in trades were executed through the platform in a single day as volatility spiked.
With over 75 managers on its platform and a central investment team of two portfolio managers supported by research analysts, Nickel’s real-time alerting systems were triggered immediately. A cross-functional task force convened late on a Friday night to reinforce systematic risk oversight, coordinate risk exposure with pod managers, and steward capital allocation during the drawdown.
Despite extreme market turbulence, Nickel’ writes that its approach proved resilient. According to data from BarclayHedge, the Diversified Alpha Fund delivered a net return of +1.5 per cent in October. Barclayhedge data also suggests the volatility of returns for the fund over the last 12 months has been around 6 per cent
