The November 2025 Bitcoin Leverage Liquidation Event: Exposing Systemic Vulnerabilities in DeFi Lending and Margin Trading
- The 2025 Bitcoin leverage liquidation crisis exposed critical DeFi vulnerabilities, triggering $1.3B in liquidations and destabilizing protocols like Balancer and Stream Finance. - Exploits in stable pools and opaque Curator models caused $160M in frozen funds, with Euler facing $137M in bad debt after Stream Finance's xUSD collapse. - Experts warn of systemic risks as DeFi's interconnectedness amplifies failures, while solutions like RedStone's Credora aim to address real-time credit monitoring gaps. -
Bitcoin’s sharp 17% drop to $103,000 in the wake of the Balancer hack intensified the crisis, causing over $1.3 billion in forced liquidations and pushing leading altcoins into bearish territory, as noted in a
A major contributor to the crisis was the opaque Curator model used by platforms such as Euler and Morpho. These protocols enabled off-chain strategies to deliver high annual yields, but the lack of visibility created risks similar to peer-to-peer lending. The downfall of Stream Finance, set off by the liquidation of an external Curator’s positions during market swings, resulted in $160 million of user assets being frozen and $137 million in bad debt for Euler, according to the
The aftermath also exposed the shortcomings of conventional risk management approaches. Even with repeated audits, protocols remained susceptible to advanced attacks, underscoring the importance of real-time monitoring. RedStone’s Credora platform has been highlighted as a possible answer, providing live credit and collateral tracking to help prevent future domino effects, as outlined in the
As DeFi continues to confront these obstacles, the events of November 2025 stand as a stark warning about the systemic dangers present in interconnected, lightly regulated environments. Both investors and regulators must focus on improving transparency, conducting stress tests, and fostering collaboration across protocols to prevent future disasters.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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