Quick Breakdown
- $20B wiped out: October’s crash crushed market makers and broke long-standing delta-neutral strategies.
- Liquidity at multi-year lows: Market makers pulled out, thinning order books to 2022 levels.
- Shift in trading venues: Users moved to on-chain perps, but manipulation risks persist.
The sharp crypto market crash in October marked a turning point for professional traders, wiping out billions and dismantling strategies that had powered easy profits for years, according to crypto exchange BitMEX.
In its State of Crypto Perpetual Swaps in 2025 report released Thursday, BitMEX said the market turmoil between October 10 and 11 erased roughly $20 billion and represented the most damaging event ever for sophisticated crypto market makers.
2025 was a brutal stress test for the perp market 📉
From the $20bn Oct crash to the death of “easy” funding yield, the game has changed.
Key insights from our 2025 Crypto Perps Report:
1️⃣ The Hard 10-11 Oct Lesson: Auto Delveraging loops broke hedge trades, leaving orderbooks… pic.twitter.com/v0hPyQSQpa— BitMEX (@BitMEX) January 8, 2026
The exchange explained that a cascade of auto-deleveraging mechanisms, where exchanges forcibly unwind leveraged positions to protect themselves, shattered market makers’ traditionally “safe” delta-neutral strategies. As a result, liquidity providers pulled back en masse, leaving crypto order books dangerously thin.
Liquidity dries up as hedging strategies collapse
Market makers typically reduce risk by holding spot assets while maintaining offsetting short positions. During the October crash, however, auto-deleveraging systems closed those hedges without warning, leaving firms exposed to falling prices.
BitMEX said this breakdown of the neutrality promise forced market makers to exit markets throughout the fourth quarter, pushing order book depth to its lowest levels since 2022.
The exchange added that the once-lucrative funding rate trade, which involved arbitrage pricing differences between spot and perpetual futures, has become overcrowded. Funding yields have fallen to around 4%, underperforming even U.S. Treasury bills and effectively ending a long-running source of easy yield.
On-chain perps gain ground, but risks remain
The report also highlighted a growing divide among exchanges, separating “fair-matching” platforms from so-called B-Book exchanges, where platforms act as counterparties to user trades and reserve the right to cancel profitable positions under vague trading rules.
According to BitMEX, distrust of such practices has driven traders toward high-performance decentralized perpetual exchanges like Hyperliquid. However, the exchange warned that decentralization alone does not eliminate manipulation risks.
BitMEX pointed to the September launch of the Plasma (XPL) token, where attackers exploited transparent on-chain data and weak price oracles to trigger liquidations across perpetual positions. The incident, it said, showed that transparency does not automatically translate to user protection.
Despite the upheaval, BitMEX argued the shakeout may ultimately strengthen the industry by clearing out fragile platforms and paving the way for more resilient exchanges and genuine innovation.
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