In recent weeks, the crypto market has faced renewed pressure, with a new wave of liquidations hitting major exchanges such as Binance, OKX, and Bybit. These events serve as a reminder that even the largest markets can be fragile when volatility and mass liquidations take hold.

For some investors, the current situation has been a painful lesson, while for others, it has presented an opportunity to enter the market during a decline. One thing is clear, however: liquidations in the crypto market are becoming increasingly common. This reflects not only the industry’s speculative nature, but also its gradual maturation.

What are liquidations in cryptocurrency?

A position liquidation occurs when an exchange automatically closes a trader’s order when their losses reach a level at which the collateral (margin) no longer covers their obligations. In other words, if the price of an asset moves sharply against the position and the account balance cannot withstand the loss, the systеm forcibly closes the trade. This is how the liquidation mechanism in the crypto market works, affecting price dynamics daily.

It is triggered by margin trading, which occurs when a trader uses leverage and trades with an amount greater than their own capital. For instance, with leverage of 1:50, a 2% price change can completely wipe out a deposit. Exchanges monitor margin in real time and trigger the automatic selling or buying of assets to cover losses if necessary. Such transactions often snowball, causing mass liquidations.

These processes strongly impact the market. When liquidations reach a critical level, the market begins a self-sustaining movement. The mass closure of positions results in a sharp drop in prices, reduced liquidity, and increased volatility. Thus, liquidations significantly impact cryptocurrency prices — even short-term waves can cause prices to collapse by tens of percent.

Causes of the New Wave of Liquidations

High Leverage and Margin Trading

Excessive leverage was one of the key reasons for liquidations in the crypto market in 2025. Exchanges continue to offer traders high leverage — up to 100x in futures and derivatives markets. This creates a “powder keg” effect: even minor price movements trigger massive liquidations, especially among retail traders.

Sharp price fluctuations in Bitcoin and altcoins

The second reason for liquidations is extreme market volatility and mass liquidations following sharp price movements. For instance, at the end of October 2025, Bitcoin lost about 8% of its value in 24 hours, while some altcoins lost over 15%. These price surges triggered the liquidation of hundreds of millions of dollars in long positions. Analysts attribute the Bitcoin crash and liquidations to profit-taking by major players and weak liquidity over the weekend. These events demonstrate that the crypto market is highly sensitive to the actions of market makers, who can manipulate prices with just a few large orders. 

News, Regulatory Measures, and Macroeconomic Factors

Amid expectations of decisions by the US Federal Reserve and new regulatory initiatives in Asia and Europe, traders became more aggressive, opening positions in both directions. However, the release of unexpected macroeconomic data, such as rising government bond yields and declining risk appetite, triggered a wave of liquidations and a collapse in the crypto market.

Furthermore, several exchanges increased collateral requirements and restricted access to derivatives for unregulated jurisdictions. This resulted in a temporary liquidity shortage and accelerated mass liquidations.

Consequences of Liquidations for the Market

Price Collapse and Volatility

In turn, these liquidations became a powerful trigger for a rapid decline in prices. When exchanges begin to close unprofitable positions en masse, it increases selling pressure, leading to a precipitous price decline. In a matter of hours, Bitcoin can lose thousands of dollars in value, and altcoins can lose percentages in the tens. These dynamics make trading extremely challenging, even for experienced traders. Furthermore, large liquidations in derivatives markets often spread to spot markets like dominoes, forcing investors to accept losses and reduce positions.

Increased panic among traders and investors

Mass liquidations undermine market confidence and trigger panic behavior. Seeing billions of liquidations on Binance and other platforms intensifies traders’ fear of a new crash. An avalanche of emotionally driven selling ensues. This creates a “panic effect,” in which short-term drawdowns turn into full-blown crashes. Liquidations not only result in direct losses for investors, but also in a loss of confidence in their strategies and trading instruments.

Decreased liquidity and trust in exchanges

Mass liquidations inevitably lead to a decrease in market liquidity. Large market participants temporarily reduce trading activity, market makers decrease order book depth, and retail traders transfer assets to cold wallets. Consequently, even small orders have a greater impact on the price.

Furthermore, the impact of liquidations on exchange trust is particularly noticeable when users accuse platforms of a lack of transparency or manipulation. Following recent cases involving Binance and OKX, many investors have raised questions once again about the fairness of liquidation mechanisms and the need for external regulation.

Lessons for Investors

• One of the main lessons from liquidations is that traders must understand the dangers of excessive margin trading. Leverage increases profits and losses. Even experienced futures traders often underestimate how quickly a cryptocurrency position can be liquidated. Traders should remember that each additional level of leverage increases the risk of forced order closure.
• A second defensive strategy is portfolio diversification. Investors who distribute their capital among Bitcoin, altcoins, stablecoins, and traditional assets can significantly reduce the risk of losing all their funds. Furthermore, it’s wise to avoid concentrating assets on one platform. During times of crisis, technical failures, withdrawal delays, and liquidation systеm errors are common.
• The third lesson is how to properly use risk management. For retail traders, knowing how to avoid liquidation in the crypto market is especially important. Experts advise reducing leverage, using stop-loss orders, and controlling margin positions. Setting proper protection levels reduces risk and allows you to exit a position early without waiting for your entire deposit to be wiped out. Modern analytical services and trading bots help track the impact of liquidations on cryptocurrency prices and adjust positions in real time. This has become standard practice for professional market participants and an essential element of a survival strategy for beginners.

Reactions of Exchanges and Regulators

Following another wave of liquidations, major exchanges have begun tightening margin trading rules. Binance, OKX, and Bitget have reduced the maximum leverage for new users to 20x and for retail traders to 10x. These measures are aimed at reducing systemic risks and stabilizing trading platforms. Oversight of automated liquidations has also been strengthened; some platforms are implementing algorithms that gradually reduce positions instead of closing them immediately. This helps prevent chain reactions.

At the same time, exchanges are making efforts to educate users. They warn users of the risks before they open trades, and some have introduced a “training mode.” This mode simulates leveraged trading without real money, which minimizes cases of inexperienced leverage use.

These steps reflect the growing understanding that leverage plays a significant role in liquidations.

Meanwhile, the regulation of crypto margin trading is becoming a hot topic, and regulators are beginning to respond. In the US, the EU, and Singapore, regulations that would limit leverage for retail investors and require transparency from exchanges are under discussion.

Examples of Large Liquidations

In spring and fall of 2025, the market experienced several waves of large liquidations on Binance and other exchanges. These events marked turning points for the entire crypto sector. According to CoinGlass, over $1.4 billion worth of positions were liquidated in a single day on October 18, with Binance accounting for nearly 60% of the total volume. Long positions in Bitcoin and Ethereum, opened with high leverage in anticipation of further growth, were hit particularly hard. When the price of BTC fell below $62,000, exchange mechanisms triggered a chain reaction of liquidations. Within hours, prices fell another 6%, and mass liquidations of Bitcoin and altcoins dragged down the entire derivatives market. OKX and Bitget experienced similar dynamics, with liquidations in futures and derivatives being accompanied by surges in sell orders and drops in order book liquidity.

The situation this year is somewhat reminiscent of the crises in 2021 and 2022, when liquidations and the collapse of the crypto market were linked to macroeconomic shocks and the collapse of individual projects, such as Terra and FTX. Even then, it became clear that resilient exchanges and top traders are vulnerable to systemic risks. These experiences have shaped a new generation of market participants who view such incidents not as catastrophes, but as signals to reevaluate their trading and capital management approaches.

Prospects and Future of the Market After Liquidations

According to experts, each new wave of cryptocurrency liquidations helps cleanse the market in the long term. The mass closure of excessively risky positions reduces speculative pressure, making trading more sustainable. Infrastructure resilience is increasing as exchanges improve their risk control systems and users become more cautious. Exchanges are implementing built-in risk calculators and warnings about potential losses. “Proof of Reserves” programs and margin insurance mechanisms are being discussed more frequently. Reducing leverage, increasing transparency, and conducting stress tests on exchanges will help prevent cascading liquidations in the future.

Amid volatility, institutional players are beginning to set new standards. Hedge funds, crypto funds, and family offices are actively implementing liquidation protection strategies in the crypto market using derivatives and algorithmic risk management systems.

This is how the crypto market naturally matures, shifting the perception of risk from a threat to a capital management tool. 

FAQ — Frequently Asked Questions

• What is a cryptocurrency position liquidation?

It’s the automatic closure of a trader’s order by the exchange when their losses reach a critical level. In other words, if the price of an asset moves against the position and the account doesn’t have enough funds to maintain the margin, the systеm forcibly closes the trade to avoid a negative balance.

• Why do liquidations occur so frequently in crypto markets?

The reasons are simple: high volatility, margin trading, and the use of leverage. Even 2-3% fluctuations in the Bitcoin price can lead to significant liquidations, particularly when many traders open positions in the same direction. As a result, a wave of order closures can begin minutes after a sharp market movement.

• How can investors protect themselves from liquidations?

It’s important to use stop-loss orders and limit orders, avoid excessive leverage, and control position sizing. You should also diversify your portfolio across different assets and platforms.

• Do liquidations affect the long-term price of Bitcoin and altcoins?

In the long term, liquidations clear the market of overheating and contribute to stabilization. This is why analysts view liquidations as an inevitable yet beneficial process in the industry’s evolution.

Conclusion

The new wave of cryptocurrency liquidations was one of the defining events of late 2025 — a painful yet necessary reminder of the importance of risk management in a volatile environment. Massive position closures exposed infrastructure weaknesses, traders’ vulnerability to leverage abuse, and algorithmic strategies’ limitations in the face of rapid price fluctuations. Despite their apparent catastrophic nature, such crises ultimately accelerate the industry’s transition to greater resilience. Exchange measures are implemented, regulation develops, and investors become more cautious. Thus, by recognizing and adapting to risks, the crypto industry can reach a new level of maturity and transparency.

Therefore, the massive cryptocurrency liquidations of 2025 are not the end of a cycle but an important lesson for all participants, from traders to regulators.

Thank you for your attention. Invest safely and profitably!

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