According to data from CoinGlass, forced liquidations in the crypto derivatives market reached approximately $150 billion in 2025.
At first glance, this number looks like a year of sustained crisis. For many retail traders, seeing the price feed turn red has become shorthand for confusion. In reality, it captured something more mundane and structural: the notional value of futures and permanent positions that would force exchanges to close if margin ran out.
In most cases, that flow was more of a maintenance function than a crash. In markets where derivatives set marginal prices rather than spot markets, liquidations acted like a periodic levy on leverage.
Viewed in isolation, the numbers looked alarming. But against the backdrop of the derivatives machine of 2025, that was not the case.
The total sales of cryptocurrency derivatives amounted to about $85.7 trillion annually, or about $264.5 billion per day.
In that context, clearing aggregates represented a byproduct of a market where perpetual swaps and basis trading were the primary instruments, and where price discovery was closely tied to margin engines and clearing algorithms.
As such, market open interest has steadily recovered from the depressed levels following the 2022-2023 deleveraging cycle as the trading volume of cryptocurrency derivatives increased.
By October 7, the nominal open interest across major venues reached approximately $235.9 billion. Bitcoin was trading as low as around $126,000 earlier this year.
The spread between spot and futures prices supported thick basis trading and carry structures that relied on stable funding and orderly market behavior.
Essentially, the critical stresses were not evenly distributed. This was driven by record open interest, crowded positioning, and a growing share of leverage in mid-cap and long-tail markets.
This structure worked until a macroshock occurred, where margin thresholds were clustered and risks were pointing in the same direction.
Macro shock that broke the pattern
The breakpoint in the crypto derivatives market did not come from within the emerging industry. Instead, the catalyst was driven by the policies of the world’s largest countries.
On October 10, President Donald Trump announced a 100% tariff on imports from China and signaled additional export controls on critical software.
This statement caused a sudden risk-off movement in global risk assets. In equities and credit, the correction manifested itself as widening spreads and falling prices. In crypto, it collided with a market that had long been leveraged and left record derivative exposure.
The first move was straightforward: spot prices fell as traders reduced risk.
But in a market where perpetual futures and leveraged swaps determine margin ticks, that spot movement was enough to push a large block of long positions past the maintenance margin line.
So exchanges began liquidating margin-starved accounts into order books that were already thinning as liquidity providers withdrew.
As a result, forced liquidations across the market from October 10th to 11th totaled more than $19 billion.
The majority were on the long side, with estimates that 85% to 90% of extinguished positions were bullish bets. This bias confirmed positioning data that had been volatile for several weeks, a one-sided market biased toward the same trading direction and the same set of instruments.
The wave of liquidations initially followed a standard path. Accounts that violated margin thresholds were tagged for closure. Positions were sold at or near market price, bidding dried up and the price was pushed to the next stop tier.
Open interest fell by more than $70 billion in a matter of days, dropping from a peak in early October to about $145.1 billion by year-end.
Even after the crash, the numbers at the end of the year were higher than they were at the start of 2025, highlighting the influence that had been building up before the crash.
What made October different from daily redemptions was not the presence of clearing, but the concentration of clearing and how product features interacted with liquidity depletion. Funding conditions tightened, volatility soared, and hedging assumptions held for much of the year crumbled in a matter of hours.
When a safety device turns into an amplifier
The most important changes during this period occurred through mechanisms that are usually invisible. This means that backstop exchanges are deployed when standard liquidation logic stalls.
Under normal circumstances, liquidation is handled by selling the position at the bankruptcy price and using insurance funds to absorb the remaining losses.
Automatic deleveraging (ADL) acts as a contingency behind that process. When losses threaten to exceed what can be covered by insurance funds and fees, ADL protects a venue’s balance sheet by reducing exposure to profitable contra accounts.
From October 10th to 11th, those safety measures took center stage.
As order backlogs for some contracts have declined and insurance buffers have been squeezed, ADLs have become more frequent, especially in less liquid markets. Profitable shorts and market makers saw their positions reduced according to pre-set priorities, often at prices that diverged from the prices they had chosen to trade.
The impact was severe for companies implementing market-neutral or inventory-hedging strategies. Futures short legs intended to offset spot or altcoin exposures have been partially or fully closed by venues, turning intended hedges into real gains and losses, leaving residual risk unprotected.
In some cases, accounts were forced to reduce winning positions in Bitcoin futures while remaining long in thin altcoin purps as they continued to fall.
The biggest distortions appeared in those long-tail markets. Bitcoin and Ethereum have fallen 10% to 15% during the period, while perpetual contracts for many small tokens have fallen 50% to 80% from recent levels.
In markets with limited depth, forced sells and ADLs hit order books that are not built to absorb such large flows. As the bids disappeared, the price differential decreased and the mark price used for margin calculations was adjusted accordingly, drawing more accounts into liquidation.
The result was a loop. The liquidation caused the price to fall, widening the gap between the index price and the level at which the ADL event was executed. Market makers who may have intervened with tighter spreads face uncertain hedge execution and the prospect of involuntary reductions.
This causes many companies to reduce their quote size or increase their quote size, further reducing visible liquidity and forcing liquidation engines to operate on thinner books.
This episode highlighted an important point for markets where derivatives define prices. Safeguards that involve risk under normal circumstances can amplify risk if too much leverage is piled up in the same direction and at the same venue.
This collapse was not just “excessive speculation.” It was the interplay of product design, margin logic, and infrastructure limitations under stress.
Concentrated venue, narrow aisles
Venue concentration also influenced market outcomes, as did leverage and product structure.
This year, liquidity in cryptocurrency derivatives has been concentrated around a small group of large platforms.
For context, Binance, the largest cryptocurrency exchange by trading volume, processed around $25.9 trillion in notional value during the year, capturing nearly 30% of the market.
Three other companies, including OKX, Bybit, and Bitget, followed with revenue of $10.76 trillion, $9.43 trillion, and $8.17 trillion, respectively.
Together, the top four companies account for approximately 62% of global derivatives trading.
Most days, that focus simplified execution. This created depth in the small order book and allowed large traders to move risk with predictable slippage. Tail events meant that a relatively small number of venues and risk engines were responsible for the majority of liquidations.
During the October holidays, these venues de-risked en masse. A similar book of customer positions, similar margin triggers, and similar liquidation logic simultaneously created a wave of forced selling.
The infrastructure connecting these platforms (on-chain bridges, internal transfer systems, and fiat rails) was strained as traders sought to move collateral and rebalance positions.
As a result, withdrawals and inter-exchange transfers have slowed, narrowing the channels companies rely on to arbitrage price differences and maintain hedges.
Cross-exchange strategies mechanically fail if funds cannot be moved quickly between exchanges. A trader who is short on one exchange and long on another may be forced to reduce one leg by ADL while not being able to replenish margin or transfer collateral in time to protect the other exchange. Spreads widen as arbitrage capital recedes.
Lessons for the crypto derivatives market
In October’s episode, we condensed all of these moves into a two-day stress test. The nearly $150 billion in liquidations for the year is now seen less as a measure of the turmoil and more as a record of how the derivatives-dominated market is hedging risk.
In most cases, the authorization was orderly and absorbed by insurance funds and routine liquidation.
The October window exposed the limitations of a structure that relies heavily on a small number of large venues, high leverage on mid-cap and long-tail assets, and a backstop that can reverse roles under pressure.
Unlike previous crises that centered around credit failures and bankruptcies of financial institutions, the 2025 crisis did not trigger a visible chain of defaults. The system reduced open interest, repriced risk, and continued operations.
The price was borne by concentrated P&L hits, sharp dispersion between large-cap and long-tail assets, and a clearer picture of how much of market behavior was determined by plumbing rather than narrative.
For traders, exchanges and regulators, the lessons were direct. In markets where derivatives determine prices, the “liquidation tax” is more than just an occasional penalty for overleveraging. This is a structural feature that, under hostile macro conditions, can transform from a routine scavenger to a collision engine.