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Bitcoin Leverage Liquidation Spike: A Warning Story on Heightened Risks in Derivatives Trading

Bitcoin Leverage Liquidation Spike: A Warning Story on Heightened Risks in Derivatives Trading

Bitget-RWA2025/11/23 16:18
By:Bitget-RWA

- 2025's crypto derivatives market saw $17B in Bitcoin liquidations on October 10, driven by leveraged positions collapsing amid a 18.26% price drop. - November 2025 saw $2B+ daily liquidations as bearish sentiment intensified, with Bybit/Hyperliquid accounting for 50% of losses and long positions dominating. - Bybit and Binance faced leverage contraction post-crash, with open interest halving on Bybit and 30% declines at Binance, revealing structural fragility. - Rising USD and Treasury yields compounded

The crypto derivatives sector has become a powerful force, intensifying both profits and losses in ways that test even the most experienced traders. Events throughout 2025 have highlighted this reality, with leveraged Bitcoin trades drawing attention as a major source of systemic risk. As market swings grow sharper and leverage ratios reach new heights, the relationship between trader psychology, open interest, and funding rates exposes a delicate balance. This report explores the spike in leverage-driven liquidations, examines the influence of leading platforms such as Bybit and Binance, and considers the wider consequences for risk escalation in a market increasingly marked by extremes.

A Historic Liquidation: October 2025 and the $17 Billion Shock

One of the most dramatic examples of risk magnification occurred on October 10, 2025, when a single day of liquidations wiped out $17 billion in notional value from Bitcoin futures.

over three months, with futures open interest peaking at $220.37 billion in early October. The crash was driven not just by price declines, but by a chain reaction of leveraged trades being forced to close. during a February 2025 downturn, with nearly 90% of those losses coming from long positions. These incidents illustrate how concentrated leverage can turn corrections into downward spirals.

November 2025: Renewed Liquidations and Growing Bearishness

November brought no relief from volatility. When Bitcoin slipped below $85,000, derivatives liquidations soared past $2 billion in a single day, with Bybit and Hyperliquid responsible for more than half of the total losses.

, as CoinGlass reported $1.86 billion in long liquidations compared to just $140 million in shorts. This disparity points to a prevailing bearish mood, , which plunged into "Extreme Fear" territory.

The selloff was made worse by unprecedented outflows from U.S. spot Bitcoin ETFs, which shed over $3 billion in November.

that could have cushioned the impact of forced perpetual contract sales, thereby intensifying each wave of liquidations. At the same time, toward neutral, and open interest fell from the highs seen in September and October, indicating a pullback in speculative leverage.

Exchange-Specific Trends: Bybit, Binance, and the Leverage Balancing Act

Understanding risk escalation requires a close look at Bybit and Binance.

that open interest in leveraged swap contracts stalled at $9 billion in November 2025, about half the notional value seen before the October 10 crash. This suggests traders were hesitant to rebuild leverage after the October rout. On Binance, to 737,540 BTC ($66.54 billion) by November 18, 2025, down from a $94.12 billion peak in early October.

The inverted implied volatility curve for Bitcoin and

, as noted by Bybit, further highlights the market's vulnerability. , with Deribit's DVOL index climbing into the low 60s and put options trading at a premium over calls. This defensive stance, coupled with steady perpetual futures open interest, signals ongoing caution about taking on new leverage.

Crucial Price Zones and Macro Headwinds: Walking a Tightrope

Bitcoin's movements in November 2025 have clarified key support and resistance points. Bulls need to reclaim $85,000 to ease liquidation risks and discourage shorts from targeting perpetuals.

stands out as a high-volume region with strong psychological importance. Above, the $90,000–$94,000 range is packed with short-term call option open interest, setting the stage for potential volatility spikes.

Wider economic factors add complexity. A strengthening U.S. dollar and rising 10-year Treasury yields have increased risk aversion, making it harder for Bitcoin to recover. These pressures, combined with the inherent instability of leveraged trades, mean that even small price moves could trigger more liquidations.

Conclusion: Adapting to the Evolving Derivatives Landscape

The wave of Bitcoin leverage liquidations in 2025 reflects deeper structural weaknesses rather than isolated incidents. As derivatives markets expand and become more intricate, risk amplification is becoming unavoidable. For market participants, the takeaway is unmistakable: trading with leverage in a volatile Bitcoin environment requires not only caution but a reassessment of risk appetite. The ongoing interaction between trader sentiment, exchange behavior, and macroeconomic trends will keep shaping the market, making thorough research and risk management strategies indispensable. In this shifting landscape, adaptability is key—and recognizing that leverage, while tempting, can quickly turn into a major risk is crucial for survival.

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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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