Billion-Dollar Liquidation Events: Signals and Trends in Crypto Markets
Billion-dollar liquidation events in cryptocurrency markets have become alarmingly frequent. While these crashes often occur abruptly, on-chain data, leverage positioning, and technical signals usually indicate stress well before the forced selling begins. By reconstructing significant historical events, we can better understand their dynamics and anticipate similar occurrences in the future.
This exploration will focus on two pivotal events: the long liquidation cascade on October 10, 2025, and the short squeeze on April 23, 2025. We will closely examine the signals that were present leading up to both, with a primary focus on Bitcoin, which continues to dominate nearly 60% of the total market.
October 10, 2025 — The Largest Long Liquidation Cascade Came With Signs
On October 10, 2025, over $19 billion in leveraged positions were wiped out—the largest liquidation event in crypto history. While headlines surrounding U.S.–China tariffs are often cited as the immediate trigger, a closer look at market data reveals structural weaknesses had been developing for weeks. Out of the total liquidations, almost $17 billion were long-biased positions.
Price Extension and Leverage Expansion (Sept 27 – Oct 5)
Between September 27 and October 5, Bitcoin surged from approximately $109,000 to above $122,000, testing the $126,000 threshold. This rapid ascent bolstered bullish sentiment, prompting aggressive long positioning. During this same timeframe, open interest escalated from around $38 billion to more than $47 billion, indicating a growing reliance on derivatives.
Gracy Chen, CEO of Bitget, noted, "Modern market structures make leverage far more synchronized than in earlier cycles."
As leverage increased, the inflow of Bitcoin to exchanges plummeted from roughly 68,000 to about 26,000. Despite a rally in prices, holders were hesitant to sell, indicating that supply remained largely off exchanges while leveraged exposure climbed.
Profit-Taking Beneath the Surface (Late Sept – Early Oct)
On-chain profit data signified that distribution had already commenced. From late September through early October, the Spent Output Profit Ratio (SOPR), which measures whether coins are sold at a profit or loss, rose from around 1.00 to approximately 1.04, reflecting that more coins were sold at a profit.
This occurred amid low exchange inflows, implying that early buyers were quietly locking in gains without triggering immediate selling pressure. The rising SOPR amidst burgeoning leverage indicated a potential risk hidden beneath apparent bullishness.
Short-Term Holders Flip from Capitulation to Optimism (Sept 27 – Oct 6)
The Net Unrealized Profit/Loss (NUPL) metric for short-term holders provided clear warning signals. It showed a significant shift from a state of capitulation on September 27, with a reading around -0.17, to optimism by October 6, where it rose to around +0.09. Such rapid transitions in sentiment are fraught with danger, as traders who recently shifted to profitability may become overly sensitive to market pullbacks, prompting sudden selling.
Momentum Weakens Ahead of the Breakdown (July – October)
Technical momentum indicators demonstrated a deterioration over several months. From mid-July to early October, Bitcoin exhibited a clear bearish RSI divergence—prices achieved higher highs while the RSI showed lower highs. This highlighted weakening demand beneath the surface.
Defense Phase and Structural Breakdown (Oct 6 – Oct 9)
Following October 6, the price momentum faded, testing support levels. Yet, open interest remained elevated, and funding rates stayed positive, suggesting traders were more inclined to defend their positions rather than exit. This dynamic is mediating systemic risks, as Chen points out, “When positions approach liquidation, traders often add margin… Individually, that can make sense. Systemically, it increases fragility.”
October 10 — Trigger and Cascade
The breaking point arrived on October 10, when tariff-related headlines began to echo in the market. As prices plummeted, previously leveraged positions slipped into loss, accelerating margin calls. Open interest dropped sharply, while exchange inflows surged, precipitating the largest liquidation cascade in crypto history.
Could This Long Liquidation Cascade Have Been Anticipated?
Several warning signs emerged in early October, suggesting a long squeeze was imminent:
- Rapid price extension from late September
- Near-record levels of open interest
- Rising SOPR, indicating profit-taking
- A swift recovery in STH-NUPL
- Low exchange inflows that concentrated risk in derivatives
- Long-term RSI divergence signaling weak momentum
Collectively, these signals painted a picture of an overleveraged market, emotionally unstable and structurally weak.
April 23, 2025 — How a Major Short Liquidation Cascade Came With Hints
On April 23, 2025, Bitcoin experienced a sharp rally that triggered over $600 million in short liquidations during one trading session. While this rally seemed abrupt, on-chain and derivatives data indicated a fragile market structure had developed over preceding weeks after an early-April sell-off.
Early Technical Reversal Without Confirmation (Late Feb – Early April)
From late February to early April, Bitcoin was in a downward trajectory making lower lows. However, on the 12-hour chart, the RSI indicated bullish divergence, suggesting weakening selling pressure despite declining prices. Yet, exchange outflows continued to decline, indicating that dip buyers were hesitant, and accumulation was limited.
Bearish Positioning After the April 8 Low (Early – Mid April)
On April 8, Bitcoin reached a local bottom near $76,000. Rather than reducing their risk exposure, traders bolstered bearish positions, with funding rates dipping into negative territory and open interest climbing toward $4.16 billion. Most traders anticipated a further downward trend, maintaining a negative market sentiment.
Selling Exhaustion on Chain (April 8 – April 17)
On-chain signals showed that selling pressure was diminishing. SOPR fell near 1 and failed to sustain profit or loss spikes, indicating loss-driven selling was tapering off. Meanwhile, the STH-NUPL remained in negative territory, signaling low confidence among buyers and a lack of renewed demand.
Compression and Structural Imbalance (Mid-April)
By mid-April, Bitcoin was trading within a narrow range, marked by declining volatility. Nevertheless, open interest remained high, and funding rates largely stayed negative. A crowded short market coincided with faltering attempts to break lower, resulting in a structurally unstable environment.
April 23 — Trigger and Short Squeeze
By April 22-23, the STH-NUPL began inching toward positive territory, signaling that recent buyers had returned to modest profitability. Some traders even seized the opportunity to sell into the rally. Yet, many remained skeptical, increasing their short positions in anticipation of a temporary rebound.
When prices began to move higher, stop losses were triggered, leading to forced buying that generated a feedback loop, culminating in one of the largest short liquidation events of 2025.
Could This Short Squeeze Have Been Anticipated?
Warning signs by mid-April included:
- Bullish RSI divergence from late February
- Persistent negative funding rates
- Increasing open interest
- Weak exchange outflows and minimal accumulation
- Stabilization of SOPR near 1
- STH-NUPL remaining in the capitulation zone
Individually, these signals may have seemed inconclusive, but together they illustrated a market characterized by crowded short positions, weakening selling pressure, and fading downside momentum.
What These Case Studies Reveal About Future Liquidation Cascade Risk
The events of October and April reveal that distinct shifts in leverage and on-chain behavior can precede substantial liquidation cascades. Importantly, these occurrences are not confined to major market tops or bottoms. They often arise whenever leverage becomes concentrated, and spot participation weakens.
In both scenarios, signals emerged roughly 7 to 20 days before the peaks of liquidation cascades, showcasing how tracking vulnerabilities can provide foresight in an otherwise tumultuous market landscape.
By observing open interest alongside funding rates, exchange flows, SOPR, and NUPL, traders can identify sensitive zones that could precipitate future liquidation events, enabling more proactive risk management and investment strategies.
These interconnected patterns serve as critical guides in navigating the volatile terrain of cryptocurrency markets, where understanding market psychology, leverage dynamics, and historical precedents can ultimately foster resilience.
