The numbers for 2025 look frightening—total forced liquidations in crypto derivatives surpassed $150 billion for the year. But judging the market crisis solely based on this figure would be a misunderstanding.

From a different perspective, liquidations are actually a cost mechanism that follows price discovery dominated by derivatives. What’s the context? Total derivatives trading volume reached $85.7 trillion, with an average daily turnover of $264.5 billion. At this scale, $150 billion in liquidations is like a periodic fee paid by leveraged traders—not an anomaly, but routine operation.

The real issue lies in risk amplification. Since the low-leverage deleveraging recovery from 2022-2023, the market has accumulated several hidden dangers: open interest (OI) has rapidly rebounded, with Bitcoin’s nominal OI hitting as high as $235.9 billion on October 7. Long positions are piling up, and high leverage on small and mid-cap coins is spreading—this is a potential trigger point.

What happened during October 10-11? Liquidation amounts directly exceeded $19 billion, with 85%-90% of that being forced long liquidations. Open interest evaporated by $70 billion within a few days, leaving only $145.1 billion by the end of the year (still higher than at the start). This was not a project explosion but a rapid, concentrated risk release.

The core contradiction isn’t in the act of liquidation itself but in the market mechanism. Under extreme conditions, risk management shifts from "insurance fund absorption" to automatic deleveraging. As a result, profitable shorts and market makers are forced to cut positions, neutral strategies fail, and liquidity is drained instead. Ultimately, this creates a self-reinforcing cycle of liquidation → decline → more liquidation, with small-cap coins bearing the brunt.