Crypto liquidation cascades remain a recurring feature of leveraged markets, as shown by CoinGlass’s liquidation tracker. One such flush struck on October 9, just before the first anniversary of October 2025’s record $19 billion liquidation cascade.
The question is no longer only why traders use so much leverage. It is whether the market structures that turn sell-offs into liquidation spirals have improved.
Why Disappearing Liquidity Turns Sell-Offs Into Cascades
FTI Consulting found that Bitcoin’s top-of-book liquidity fell more than 90% on key exchanges during the 2025 crash. Top-of-book liquidity is the volume of the best bid and ask orders resting in the order book.
When that depth vanishes, forced selling has little to absorb it. Each liquidation pushes the price lower, which triggers further liquidations.
This is why leverage alone is an incomplete explanation. The same leveraged positions behave very differently in a deep market than in a thin one.
How Exchange Risk Systems and Collateral Pricing Added Pressure
Galaxy Digital documented widespread auto-deleveraging (ADL) during the crash.
ADL is an exchange safeguard that closes profitable opposing positions when liquidations cannot cover losses. It protects the exchange but can force closures on traders who did nothing wrong.
Galaxy also reported collateral-pricing dislocations, including Ethena’s USDe trading near $0.65 on Binance. Traders who posted such assets as margin saw their collateral valued far below its usual level.
According to Galaxy, forced position closures and unstable collateral valuations compounded the turmoil.
Together, thin order books, automated closures and shaky collateral prices fed one another. No single factor drove the cascade.
Has the Risk Gone Away, or Just Moved?
Some of the risk has shifted rather than disappeared. FTI reported that open interest fell more than 40% after the crash and that exchanges tightened certain risk controls.
More recently, Barron’s, citing CoinMarketCap, reported that leveraged positioning has moved away from Bitcoin and toward altcoins.
Extreme leverage also remains easy to find. Leverage.Trading analyzed 5,963 futures contracts across 15 exchanges and found a median maximum leverage of 50x. It found that 55.1% of Bitcoin and Ethereum contracts offered at least 100x, compared with 5.7% of other crypto contracts. These figures measure available leverage, not actual trader exposure.
“High leverage alone doesn’t explain billion-dollar liquidation events,” said Anton Palovaara, founder and lead market analyst at Leverage.Trading.
“What matters is how leveraged positions interact with disappearing liquidity, automated risk systems and collateral pricing under stress.”
The October 9 event does not show that the same mechanisms failed again. But it makes the question worth watching.
The next test is whether order-book depth, ADL behavior and collateral pricing hold up in the next sharp sell-off, particularly in altcoin markets where leverage is reportedly building.
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