Aftermath of the 1011 crash: $20 billion liquidation hits market makers hard, liquidity drops to a three-year low

【BlockBeats】The recent plunge on January 8th continues to spread. A deep report from a trading platform pointed out that this decline directly impacted the market maker group—who were forced to accumulate large amounts of unhedged spot positions. The chain reaction led to a surge of approximately $20 billion in liquidations, and market liquidity dropped to its lowest level since 2022.

What exactly happened? It turns out that the ADL (Auto Deleveraging) mechanism was triggered during the rapid decline. Its logic is to forcibly close market makers’ short positions used for hedging. It sounds straightforward, but the key issue is—when the market plunges sharply, these institutions suddenly lose their hedging options and are forced to hold naked spot positions. This directly contradicts the previous “neutral strategy” promise of perpetual contracts, causing market makers to withdraw liquidity on a large scale in Q4 2025.

As a result, the order book depth fell back to 2022 levels. Meanwhile, Delta-neutral strategies that rely on funding rate arbitrage were also caught off guard—many followers rushed in, and the “easy profits” were completely wiped out, with annualized returns now unable to even reach 4%.

Interestingly, the market has shown clear divergence: platforms operating in B-book mode are instead making huge profits, and the DeFi perpetual contract market remains easily manipulated. On the other hand, the traditional financial perpetual contract market is experiencing explosive growth.