Crypto Market Storm: Causes of Futures Liquidations and Short-Term Response Strategies

Get Liquidated Event Review: Scale and Timeline

According to Coinglass and various financial media outlets, a total of approximately $19.141 billion in liquidations occurred in the global futures and perpetual contract markets over the past 24 hours, with more than 162,000 individuals liquidated globally. The amount of long liquidations far exceeded that of shorts, indicating that this wave was driven by a rapid decline leading to a strong liquidation of long positions.

Long Position vs Short Position: Who Loses More?

Data shows that long positions have been liquidated for about 16.686 billion USD, while short positions have been liquidated for about 2.455 billion USD, indicating that most traders were previously optimistic and used leverage to chase the market, and were forced to exit during the rapid pullback. This kind of “passive deleveraging” often amplifies the downward pressure. For beginners, this suggests that the cost of using leverage to chase highs is usually higher than the cost of opening positions on dips.

Contracts and Liquidity: Why Does Slippage Widen?

The linkage between the futures market and the spot market, the decline in market making depth, and panic in market sentiment can lead to significant slippage for market orders; when liquidity providers (such as large market makers) withdraw during volatility, the order book thins out, and the liquidation price must extend outward, ultimately forming a snowball effect of Get Liquidated. Excessive leverage on a single platform or a single contract (such as the aforementioned Hyperliquid’s ETH-USDT) concentrates the risk.

Six short-term and medium-term response strategies (quantifiable)

• Maximum position limit: Total position ≤ 20%, single contract position ≤ 5%.
• Contract leverage limit: Beginner leverage ≤ 3x, Intermediate ≤ 5x.
• Stop-loss rule: Set a fixed stop-loss for each trade (e.g., 5–8%), and close the position immediately when losses reach the limit.
• Risk buffer: Account reserves at least 30% cash or low-volatility assets to avoid getting liquidated.
• Decentralized platforms and contracts: Avoid concentrating all leverage on a single exchange or a single contract.
• Regular Backtesting: Use historical volatility to backtest position strategies, covering at least 3 historical extreme drawdown scenarios.

Example demonstration:

Assuming a principal of 10,000 USD, following the “maximum position of 20%” principle, the maximum investment per trade is 2,000 USD, and with a leverage of 3x, the nominal position is 6,000 USD; if a stop loss of 6% is set, the maximum loss is approximately 120 USD (accounting for 1.2% of the total principal), significantly reducing the probability of being liquidated by a sudden market movement. Such quantitative rules can keep the drawdown per trade within an acceptable range.

Conclusion: Write the strategy as rules and strictly implement them.

Market conditions are unpredictable, but rules are controllable. Prioritizing defense in the trading manual (position size, leverage, stop loss, backup funds) and performing a checklist before each trade is the best way to avoid significant losses in the next liquidation wave. If you would like me to create a downloadable fund planning sheet (including example calculations) based on the “funding table” mentioned above, I can generate it for you.