The $19 billion cryptocurrency liquidation last Friday was recorded as a rare event in market history.
This figure is double the amount liquidated in the previous major market crash in April 2021, according to data platform Coinglass.
Lucas Kiely, CEO of Future Digital Capital Management, noted that mass liquidations of this scale are becoming increasingly likely:
“This sell-off is a serious warning to investors. High leverage is an extremely dangerous play in an environment where liquidity is so low and the market is so close to its cycle peak,” he said.
Liquidation refers to the automatic closure of positions when the collateral in an investor's account falls below a certain threshold. This typically occurs when investors use leverage to trade with debt.
At the peak of the 2021 bull market, the total value of leveraged positions on Bitcoin was around $19 billion. But just before the recent crash, that figure had reached $46 billion, according to Coinalyze data.
While the Trump administration's tariff announcement triggered the sell-off, analysts are highlighting Binance's role in deepening the decline. Binance, the largest crypto exchange, acknowledged platform disruptions caused by increased trading volume and announced that it would compensate users directly affected by the system outage.
The growth of on-chain perpetual futures (OPFs) has also been a key factor in this market turmoil. These contracts, which have no expiration date and allow for leveraged trading, have surged in popularity with the rise of exchanges like Hyperliquid and Aster.
Despite rising leverage, there have been fewer mass liquidations over the past year compared to the bull run of 2021. Eight of the 10 largest market crashes occurred in 2021, while the remaining two occurred this year.
*This is not investment advice.