The crypto derivatives market changed significantly in 2025 after the Oct. 10-11 market crash, which caused record losses and exposed problems with how crypto trading platforms manage risk, according to a report from BitMEX.
BitMEX said about $20 billion in leveraged trades were forced to close during the crash, making it the largest liquidation event in crypto history. Unlike past crashes, the losses fell more heavily on “sophisticated” market makers than on retail traders.
“The defining event of 2025 was not a macro-driven selloff, but rather a microstructure failure among most crypto exchanges,” the report reads. “The October crash will be studied for years, not for the price depth, but for the ADL Feedback Loop that harmed the market’s liquidity providers.”
According to the report, many firms were using delta-neutral strategies designed to stay balanced as prices moved. During the crash, though, exchange systems automatically closed parts of those trades. That left firms exposed as prices continued to fall.
After the crash, the report noted that market makers pulled liquidity globally in the fourth quarter (Q4) – a move that left order books at their thinnest since 2022. This underscores how important derivatives are to price stability, as markets become more volatile when liquidity dries up.
Other Findings
The report also found that funding-rate arbitrage has become overcrowded. As more traders and automated products entered the trade, funding rates fell to under 4%.
BitMEX also pointed out what it called a growing “trust crisis” in crypto derivatives markets. Some platforms, the report said, have used “abnormal trading” rules to cancel profitable trades during volatile periods.
“It became clear these were aggressive B-Book operations—taking the other side of user trades and refusing to pay out when they lost,” the report reads. “We also witnessed the weaponisation of low-float listings. The MMT incident—where a coordinated entity cornered spot supply to squeeze perp Open Interest—proved that pre-market and low-cap perps had become venues for insider washing.”
The report also noted that decentralized perpetual exchanges continued to grow, but warned that they come with new risks because trading positions are visible on public blockchains.
