The biggest liquidation day in the history of market maker Wintermute's reopening
author:Wintermute
Translation: Golden Finance Xiaozou
Original title: Market Maker Wintermute Revises the Biggest Liquidation Day in Crypto History
Last Friday, the US announced a 100% tariff on all imported goods from China starting November 1, triggering a wave of risk aversion in major markets. The S&P 500 index fell 2.9%, the VIX surged from 16 to 22, and the 10-year yield fell from 4.14% to 4.05%. Investors are de-risking and shifting to defensive allocations, and the price of gold is rising. Digital currencies were also hit hard. The total number of unclosed contracts before the incident reached 220 billion US dollars, and leveraged positions of 19 billion US dollars were liquidated within just a few hours, setting the record for the largest single-day liquidation in history.
Here's our look at the spot perpetual contract and options market.
1. Spot market
Based on centralized exchange data aggregation, we saw that sell-offs were rapid and synchronized. Most centralized exchange trading pairs bottomed out within 55 minutes (20:40 to 9:35 UTC), and drastic price fluctuations quickly depleted overall market liquidity. Liquidity quickly returned as prices recovered from their lows.
Based on aggregated exchange data for the top 50 currencies, we observed:
1. The median withdrawal was -54%, and over 90% of the tokens declined by more than 10%. BTC (-11%) and ETH (-13%) showed the strongest resistance to falling, while small to medium capitalization assets fell by 60-80% during peak periods.
2. Nearly all tokens in the global liquidation wave bottomed out at around 21:20 UTC time, then rebounded sharply as forced sell-off positions were closed, with an average rebound of +84% within 30 minutes.
3. Losses are negatively correlated with market capitalization size: based on the GMCI30 index, large-cap coins fell by an average of about -27%, and small-cap coins fell by an average of -52%. Within an hour, the order book situation returned to normal, and funds reflowed back to BTC, ETH, and major tier 1 network tokens, and the rebound of small market capitalization coins lagged behind.
4. The overall trading depth of centralized exchanges fell by about 65% during the trough period, but as the frequency of quotes and spreads returned to normal, it returned to over 90% of the pre-incident level within 35 minutes. Liquidity was provided during this period, but the spread between the quotation and the median price widened markedly.
2. Options market
After the impact of the US tariff policy triggered market panic on Friday, BTC futures positions quickly turned defensive, and traders scrambled to seek downside protection, driving total options trading volume to a record high.
The data covered tariff headlines and 24-hour activity during the market sell-off. Panic hedging dominated capital flows, and short-term put options were actively bid on. Market sentiment changed until Saturday. As BTC stabilized around $115,000, the trading strategy switched to volatility harvesting and range trading to profit by selling bullish options and shorting calendar spreads.
Volatility surged due to a surge in safe-haven demand, and implied volatility jumped 20-25 points on 7-14. Put options with execution prices of $10.5-115,000 had a premium of 10-15 volatility points compared to bullish options, making it one of the largest single-day front-end increases on record.
Options trading volume reached a record high, mainly on contracts expiring in October. About 70% of the premium went into put options below $115,000, highlighting strong demand for downside protection. The 24-hour trading volume on the Deribit platform doubled from the previous record.
The flow of capital was reversed to volatile sales on Saturday. Traders sold bullish options and cross-modal combinations in the $118,000-130,000 range, driving the implied volatility reduction from 63% to 51% in the first cycle, indicating that the market quickly judged the tariff shock as a short-term disturbance.
3. Perpetual contract market
Amid Friday's market crash, both the centralized and decentralized perpetual contract markets experienced extreme tests, and hundreds of millions of dollars of leveraged positions were liquidated within minutes. Centralized exchanges experienced record liquidation volumes and brief liquidity gaps, while on-chain DEX perpetual contracts faced heavy pressure from clearing systems and funds banks, yet mainstream DEX platforms maintained normal operation and solvency throughout the process. This incident became a real stress test for the resilience of on-chain transactions and margin systems.
As some users adopted a long and short spread strategy, their short positions were automatically reduced by ADL, causing their positions to temporarily deviate from a neutral state, and then their long positions faced liquidation as prices continued to fall. A total of more than 1,000 wallets on the Hyperliquid platform were automatically deleveraged, which may be one of the triggers for this serial liquidation incident.
Take HYPE, which suffered the worst liquidation on the entire network, as an example. Its liquidation amount reached 10.3 billion US dollars:
This liquidation triggered the first case of automatic cross-margin ADL reduction in mainstream DEX perpetual contract platforms. The function of this mechanism is to mitigate risk by closing part of the profit side's position when the reserve fund pool is exhausted.
Gas usage soared to an all-time peak of 105K, about 3 times the daily average since March, and surpassed the previous record by 2 times, reflecting a surge in on-chain clearing and trading activity during the incident.
Let's take a look at the situation of centralized exchanges:
Open positions were hit hard, and the size of most contracts was reduced by about half during the sharp decline, showing a full impact on leverage.
Funding rates have drastically turned negative, a mechanical fluctuation driven by liquidation rather than position adjustments. There was only a partial recovery over the weekend, and funding rates for most of the top 100 tokens were still below average.
All of this reminds us that in the cryptocurrency market, risk management and leverage control are critical, and we must be prepared for unexpected events.
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