Risk Runs Hot: Massive Crypto Liquidation Wave Slams Traders Overnight
Overview
A significant surge in crypto liquidations has highlighted the increased use of leverage among traders in recent months. Recent reports indicate that average daily liquidations have dramatically increased, signaling a shift in trading behavior that has led to more volatile market conditions.
What Happened
According to a report from Glassnode and Fasanara, the average daily liquidations have escalated from approximately $28 million in long positions and $15 million in short positions during the previous cycle to about $68 million in long and $45 million in short positions in the current cycle. This change has resulted in more violent sell-offs in the market.
On October 10, a particularly notable event occurred when over $640 million in long positions were liquidated within an hour as Bitcoin’s price fell sharply. This led to a significant drop in open interest, which decreased by about 22% in less than 12 hours, dropping from nearly $50 billion to $39 billion. This incident has been characterized as one of the sharpest deleveraging events in the history of Bitcoin.
Additionally, futures markets have seen record activity, with open interest reaching $68 billion and daily futures turnover exceeding $69 billion in mid-October. Perpetual contracts now constitute more than 90% of futures activity, which intensifies risk due to their continuous reset mechanism.
Spot trading has also seen a notable increase, with Bitcoin’s daily spot volume ranging from $8 billion to $22 billion, roughly doubling figures from the previous cycle. During the October 10 crash, hourly spot volume surged to $7.3 billion, as many traders opted to buy the dip instead of exiting the market.
Capital inflows into Bitcoin have fluctuated between $40 billion and $190 billion monthly, pushing its realized market capitalization to a record $1.1 trillion. Since the low in November 2022, approximately $730 billion has flowed into the network, surpassing total inflows from all prior cycles. Consequently, Bitcoin’s share of the overall crypto market capitalization has risen from 38% in late 2022 to 58% at present.
In another noteworthy statistic, the Bitcoin network processed nearly $7 trillion in transfers over the past 90 days, exceeding the throughput of major card networks in the same timeframe. This has led some participants to view Bitcoin not only as a store of value but also as an increasingly vital settlement rail.
Impact on the Crypto Market
- The increase in liquidations reflects a trend of higher leverage being used by traders, contributing to market volatility.
- Record levels of futures and spot trading activity indicate heightened interest and engagement in the crypto markets.
- The dramatic rise in Bitcoin’s market share highlights its growing dominance within the overall cryptocurrency landscape.
- Increased transaction throughput on the Bitcoin network suggests its evolving role beyond mere value storage to a functional settlement system.
- The substantial capital inflows into Bitcoin signal robust investor interest and confidence in the asset.
Updated: 12/4/2025, 3:24:08 AM
