How liquidation cascades happen: lessons from 10 October 2025

A liquidation cascade is forced selling that feeds itself. Falling price liquidates leveraged longs, the exchange sells those positions into the order book, and the sales push price down to the next group of liquidation prices.

On 10 October 2025 that loop took the Bitcoin perpetual on Binance from $116,830 to $101,516 in thirty minutes. We went back through Binance's one-minute candles and its two announcements from that weekend to see what broke and in what order. Everything below is arithmetic you can run on your own position before the next one.

What happened on 10 October 2025

Late on a Friday in New York, a threat of a 100% US tariff on Chinese imports hit every risk market, and crypto reacted hardest. Order books were already thinning for the weekend, and the market was carrying heavy leverage.

Here is the BTCUSDT perpetual on Binance, in UTC, from its own candles:

That is 13.1% in thirty minutes, with half of it bought back ten minutes later. Smaller coins had it worse. The Ether perpetual fell 15.2% over the same half hour, and the Solana perpetual lost 31.8% in thirty-one minutes.

Binance's statement puts the bottom between 21:20 and 21:21 UTC, which matches the candles. CoinGlass, the tracker most desks quote, counted more than $19 billion of leveraged positions closed in about a day, across more than 1.6 million accounts. No day before it comes close.

How one liquidation becomes a cascade

A single liquidation is an ordinary event. The cascade needs four things to line up.

1. Price reaches the liquidation prices of the most leveraged longs. These sit close to the market, because high leverage leaves little room.
2. The exchange closes those positions by selling them into the order book. Nobody chooses the price.
3. Those sales move price down to the next group of liquidation prices, which belong to traders with a little less leverage.
4. The firms that normally quote both sides step back. On 10 October the resting size at the best Bitcoin prices shrank by more than 90% on major venues, by FTI Consulting's count, so each forced sale moved price further than the one before.

Liquidation prices come in clumps. Everyone who went long near the same level with 20x has almost the same liquidation price, so thousands of positions can go in the same second. That is why the chart falls in steps.

The loop ends when the selling meets bids that carry no leverage, or when the positions left are too far away to reach. On 10 October that took thirty minutes.

Which leverage survived the wick

Take a long opened at 20:50 UTC at $116,830, in isolated margin, with the 0.4% maintenance rate of Binance's first tier. We ran it through the liquidation price formula at four settings and checked each level against the mark price, which is the price that triggers liquidation.

The mark price bottomed at $101,877, a 12.8% fall from entry. A 10x long was closed one minute before the low. A 5x long was down 12.8% at the worst moment and back to a loss of about 3% by 22:00.

All that low leverage bought that night was time. At 21:20 the 5x trader still had a decision to make.

Winning positions were closed too

Exchanges keep an insurance fund for liquidations that fill worse than the trader's bankruptcy price. When that fund cannot take a position, the exchange closes profitable positions on the other side to cover it. This is auto-deleveraging, or ADL.

Binance's rule is short: positions that are more profitable and more highly leveraged are queued first, and they are closed at the bankruptcy price of the liquidated order, with no trading fee. Hyperliquid's docs give the reason in one line: auto-deleveraging strictly ensures that the platform stays solvent.

So on 10 October some shorts were closed at the moment they were working. For a trader who was short a perpetual as a hedge against coins held elsewhere, the hedge vanished while the coins kept falling. A hedge on high leverage sits near the front of that queue.

Collateral fell with the market

The second failure was quieter. Binance lets futures and margin accounts post more than plain dollars as collateral. Three such tokens, USDE, BNSOL and WBETH, traded far below their reference value on Binance's own books that night, and accounts holding them as collateral were liquidated.

Binance says the severe depegging came after 21:36 UTC, sixteen minutes after the low in Bitcoin, and it covered users affected between 21:36 and 22:16. The payouts came to about $283 million in two batches. It has since added each token's redemption price to its price index.

In a panic, a token like these is priced by the venue's own order book. Collateral held in the settlement currency is the only kind that cannot be marked down.

What position size did to the outcome

Leverage decided who was liquidated. Position size decided how much it cost.

Example: say two traders each have a $10,000 futures account and go long at the same price. Trader A sizes from risk. A stop 2% below entry and a $100 risk give a position of 100 / 0.02 = $5,000, held in isolated margin. Trader B picks 10x in cross margin and uses the whole balance. The position is $100,000. Now price falls 13% in thirty minutes and neither stop fills. Trader A is down 13% of $5,000 = $650, which is 6.5% of the account. The position is still open. Trader B's liquidation sits about 10% − 0.4% = 9.6% below entry, because the whole $10,000 backs a $100,000 position. The account is closed out before the low.

Both traders saw the same candle. One lost a bad week. The other lost the account, a minute before price turned. We wrote up why the size comes first and how much leverage that leaves you separately.

What to check before the next one

Run these on any open position. It takes five minutes.

1. Find your liquidation price and its distance from the mark price. If a 13% fall reaches it, you were inside the 10 October wick. On an altcoin, test 30%.
2. Check that your stop is a resting order on the exchange. Binance said some of its modules had brief glitches after 21:18 UTC, two minutes before the low. An exit you planned to click may not be there.
3. Prefer isolated margin for anything sized with leverage. Cross margin puts the whole balance behind one position.
4. Look at what your collateral is. If it is a yield token or a staked token, assume the venue can mark it down.
5. If a short is a hedge, look at its ADL indicator and keep its leverage low.
6. Note the hour. This one started at 20:50 UTC on a Friday, when books are thinner than on a weekday morning.

Stops can still slip in a cascade, and a stop-limit order can be skipped entirely. A filled stop at a worse price is still a smaller loss than a liquidation.

Not financial advice.

Questions and answers

What is a liquidation cascade?

A liquidation cascade is a chain of forced sales. Falling price liquidates leveraged longs, the exchange sells those positions at market, and the selling pushes price into the next group of liquidation prices. Short squeezes are the same loop running upward.

What caused the crypto crash on 10 October 2025?

A threat of a 100% US tariff on Chinese imports hit risk markets late on a Friday, when crypto order books were thin and leverage was high. The first forced sales set off the rest. On Binance, the Bitcoin perpetual fell 13.1% between 20:50 and 21:20 UTC.

How much was liquidated on 10 October 2025?

CoinGlass counted more than $19 billion of leveraged positions closed in about a day, across more than 1.6 million accounts. It is the largest liquidation day on record.

What is auto-deleveraging (ADL)?

ADL is the last step of a liquidation. When an exchange's insurance fund cannot absorb a bankrupt position, it closes profitable positions on the other side, starting with the most profitable and most leveraged.

Can a stop loss protect you in a liquidation cascade?

A stop-market order resting on the exchange will usually fill, but at a worse price than you set, because the book is thin. That loss is still smaller than a liquidation. A stop-limit order can be skipped if price jumps past its limit.