How $150 billion USD in liquidations on the crypto market in 2025 caused Bitcoin's crash

According to data from CoinGlass, forced liquidations in the crypto derivatives market reached approximately $150 billion in 2025.

This figure on the surface suggests a year of continuous crises. For many retail investors, seeing the price boards turn red becomes a symbol of chaos. In reality, it reflects a more structural mechanism: the nominal value of futures and perpetual positions that exchanges are forced to close when margin levels fall below requirements.

Most of the time, this flow acts more as a maintenance function than a true collapse. In a market where the bid-ask spread is determined by derivatives rather than the spot market, liquidations operate as a “periodic tax” on leverage.

If viewed in isolation, the liquidation numbers look alarming. But in the context of the 2025 derivatives market, they are not unusual. The total crypto derivatives trading volume for the year reached about $85.7 trillion, averaging $264.5 billion daily.

*Total cryptocurrency derivatives trading volume in 2025 (Source: CoinGlass)*In this context, liquidation figures are merely a consequence of a market dominated by perpetual contracts and spread trading, with prices closely tied to margin mechanisms and liquidation algorithms.

As derivatives volume increases, open contracts on the market gradually recover from lows after the leverage reduction cycle of 2022–2023. As of October 7, open nominal contracts on major exchanges reached approximately $235.9 billion, while Bitcoin traded up to $126,000 earlier this year.

The gap between spot and futures prices maintains a thick layer of (basis trades), relying on stable capital sources and orderly market behavior. The real tension is not evenly distributed; it is driven by a combination of record-high open interest, accumulated positions, and increasing leverage ratios in mid-cap and long-tail markets.

This structure operates stably until a macro shock occurs, when margin thresholds tighten sharply, and risks align.

Macro Shock Disrupts the Market

The breaking point of the crypto derivatives market does not come from within the industry but from the policies of major economies.

On October 10, U.S. President Donald Trump announced a 100% tariff on imports from China and suggested controlling exports of critical software. This news caused global risk assets to enter risk-off mode. In the crypto market, this shock collided with a market that was long, leveraged, and had record-high derivatives exposure.

The initial response was a decline in spot prices as investors reassessed risks. But in a market where futures and leveraged swaps set bid-ask prices, this spot drop was enough to push a large volume of long positions beyond margin thresholds. Exchanges began liquidating under-margined accounts on already thin order books due to liquidity withdrawal.

As a result, from October 10–11, the total forced liquidation value exceeded $19 billion. Most of these were long positions, accounting for about 85–90% of the contracts wiped out, reflecting a one-sided market trend that position data had warned about for weeks.

When the Protective Mechanism Becomes an Amplifier

The October event differs from daily liquidations in its concentration and how product characteristics interact with declining liquidity. Tight capital conditions, soaring volatility, and risk mitigation assumptions that persisted most of the year suddenly shattered within hours.

The most critical mechanism during this period was auto-deleveraging (ADL), often hidden. When losses exceed the insurance fund’s capacity, ADL reduces the exposure of profitable opposing accounts to protect the exchange’s balance sheet. From October 10–11, ADL became central, activating repeatedly, especially in less liquid markets.

Funds employing market-neutral or hedge inventory strategies were heavily impacted: a short contract used to offset losses in spot or altcoins could be partially or fully closed, turning hedges into realized P&L, leaving residual risks. Many accounts also saw their winning Bitcoin futures positions reduced while still holding long positions in thin altcoin perps, which continued to decline.

The most volatile markets were the long-tail ones. While Bitcoin and Ethereum only dropped 10–15%, many smaller tokens saw perpetual contracts lose 50–80% of their value recently.

Forced liquidations and ADL attacked order books that lacked sufficient depth to absorb large volumes. Prices plummeted, mark prices adjusted, and more accounts were liquidated, creating a vicious cycle: liquidations pushed prices lower, triggering further liquidations.

Exchange Concentration and Infrastructure

Crypto derivatives liquidity is concentrated on a few major exchanges: Binance handles about $25.09 trillion, nearly 30% of the market; followed by OKX, Bybit, Bitget with $10.76, $9.43, and $8.17 trillion respectively. The top 4 exchanges account for approximately 62% of global derivatives volume.

*Leading crypto derivatives trading platforms (Source: CoinGlass)*Under normal conditions, this concentration facilitates efficient trade execution. During extreme events, it means that some exchanges and risk engines bear responsibility for most liquidations. In the October stress, exchanges simultaneously reduced risk, creating a wave of forced liquidations.

The infrastructure connecting these exchanges—on-chain bridges, internal transfer systems, fiat channels—came under pressure, slowing withdrawals and capital transfers, making cross-exchange strategies less effective.

Lessons for the Crypto Derivatives Market

The October event was a condensed stress test over two days. The $150 billion in liquidations this year, viewed from a structural perspective, is not just a sign of chaos but a way for a derivatives market to release risk.

Typically, liquidations are handled orderly, absorbed by insurance funds. In October, they exposed the limitations of a structure dependent on a few large exchanges, high leverage in mid-cap and long-tail markets, and backstop mechanisms that can reverse under pressure.

Unlike previous crises, the 2025 event did not cause a clear chain of defaults. The system reduced open contracts, re-priced risk, and continued operating. The result is concentrated P&L, significant spreads between large-cap and long-tail, and a clearer view that market behavior is driven more by mechanisms than storytelling.

For traders, exchanges, and regulators, the lesson is clear: in a derivatives-driven market, “liquidation tax” is not just a penalty for excessive leverage but a structural feature that can turn from routine cleanup into a catalyst for a collapse when macro conditions turn hostile.