Collapse of the 2025 liquidation: $150 billion lost in the fight against leverage

CoinGlass report reveals the scale of the liquidation crisis in the derivatives market over the past year. Overall, traders faced forced position closures totaling approximately $150 billion. This means the market absorbed between $4 billion and $5 billion daily in liquidations. The figures indicate a dangerous level of leverage that became a systemic problem in 2025.

Horrific Day October 10-11: When Everything Went Off the Rails

The catastrophe peak occurred in mid-October when the market entered a deadloop of liquidations. In a single session, the volume of position closures exceeded $19 billion. On that day, long positions accounted for 85%-90% of the total liquidated contracts, indicating a mass unwinding of bullish bets.

The trigger was the US announcement of new tariffs on Chinese goods. This news caused a panic risk-off across the sector. However, the real problem was the hyper-leverage already present in BTC and other assets. When prices started falling, the liquidation chain began to sustain itself, forcing more traders to close positions at a loss.

ADL Machine Failed at a Critical Moment

The technical side of the crisis is linked to flaws in the automatic position reduction system (ADL). Instead of smoothly distributing the closure volumes, the ADL mechanism created asymmetry in execution, destabilizing the market. Some assets with a long tail dropped by 80% of their value within minutes.

Assets with low liquidity were especially affected, where order book depth was insufficient. Traders who believed they were trading relatively small assets found themselves trapped with no exit price.

Systemic Risks Remain Unresolved

Although widespread exchange bankruptcies were avoided, the CoinGlass report clearly shows the vulnerability of liquidation infrastructure. Management of extreme risks (margin and position management) remains a weak spot in the industry.

Analysts predict that in 2026, focus will be on reforming ADL mechanisms, improving liquidity for altcoins, and implementing stricter leverage requirements.

The crypto process constantly self-corrects through pain points. 2025 became a litmus test for the derivatives market, revealing exactly where the system shows cracks.