Massive Leverage Triggers Crypto Flash Crash

Driven by the inflow of institutional capital, the crypto market seemed to stabilize. However, a wave of liquidations on derivative products highlights its fragility. According to Glassnode, these liquidations have nearly tripled, a consequence of excessive leverage.

A record purge on futures markets

October 10, 2025 will go down in history as one of the most violent liquidation episodes of this cycle.

According to the latest report from Glassnode and Fasanara, the market faced a massive wave of liquidations on crypto derivatives. Analysts describe a rise in leverage that reached a critical threshold : “daily liquidations on futures markets rose from an average of $28 million for long positions and $15 million for shorts in the last cycle, to $68 million long and $45 million short in the current cycle”.

This imbalance peaked during an episode designated by researchers as “the Early Black Friday”, where more than $640 million per hour were liquidated, plunging bitcoin from $121,000 to $102,000.

Here are the key facts of this critical day :

• Massive liquidations : more than $640M/hour liquidated on long positions during the October 10 session ;

• A sharp drop in BTC : the move from $121,000 to $102,000 in a few hours ;

• Collapse of open interest : a drop from $49.5B to $38.8B, a 22 % plunge in under 12 hours ;

• A record exposure : total open interest on derivatives hit a peak at $67.9B ;

• An explosion of volumes : up to $68.9B daily trading on futures by mid-October ;

• Dominance of perpetual contracts : These account for more than 90 % of activity on futures markets.

This market setup, characterized by excessive use of leverage, favored a cascading liquidation phenomenon. The dynamic started quickly, bitcoin’s drop triggering massive margin calls, forcing automatic closure of many long positions.

The new structural dynamics of the crypto market

Beyond the current tensions on derivatives, the Glassnode report reveals a deeper structural mutation of the market.

Since the launch of spot ETFs on bitcoin in early 2024, market dynamics have been profoundly redirected. “Price discovery has shifted to the spot market,” the report points out, while leverage has concentrated on futures markets.

This polarization creates an ecosystem where the reference price is now formed outside crypto derivatives, but speculation continues to inject systemic volatility. This shift was made possible by a massive inflow of capital into the cash market. Since the 2022 trough, over $732 billion have flowed into bitcoin, bringing its realized capitalization to a historic record of $1.1 trillion.

In this context, the profile of BTC holders has also evolved. Today, nearly 6.7 million bitcoins are held by institutional entities, including ETFs, corporate balance sheets, and decentralized treasuries. Just since the beginning of the year, ETFs have absorbed about 1.5 million BTC.

Meanwhile, balances on centralized exchanges are declining, signaling a long-term holding strategy rather than tactical use. This new holding structure, coupled with the fact that the Bitcoin network processed $6.9 trillion in transfers over the last 90 days, surpassing Visa and Mastercard in the same period, indicates a gradual repositioning of bitcoin as an institutional-scale payment rail.

The current crypto market dynamic, dominated by leverage and derivatives, raises questions about the strength of the rebound. While the bitcoin price continues its ascent, the market structure remains fragile. Caution is advised as the balance seems precarious.