On Oct. 10, 2025, crypto went by its largest liquidation occasion in historical past. In simply 25 minutes, $19 billion in leveraged positions had been worn out. Bitcoin dropped from $126,000 to $105,000. Ethereum fell 12%. Some altcoins misplaced greater than half their worth in a single day.
What many individuals missed was not the worth transfer, however what occurred contained in the order books.
Exchanges had been nonetheless reporting large buying and selling quantity. But many merchants couldn’t execute wherever close to the costs they had been seeing on their screens. Depth vanished, and spreads exploded. Liquidity that usually absorbs massive trades merely disappeared.
Quantity confirmed exercise. Liquidity confirmed actuality.
The Quantity Phantasm
For years, the business has used quantity as a proxy for alternate high quality. Greater quantity is assumed to imply higher liquidity and higher execution.
October proved how deceptive that assumption is.
Analysis has proven that in some unregulated venues, 70 to 95% of reported quantity can come from wash buying and selling. Even on reliable exchanges, massive turnover doesn’t assure that actual orders are sitting near the mid value once you want them.
Through the October crash, perpetual futures quantity stayed excessive whereas executable depth collapsed by greater than 98%. What merchants noticed was pressured liquidations racing by practically empty books. That created the phantasm of liquidity, whereas in actuality virtually nothing was out there to commerce towards.
When you had been counting on quantity to guage execution high quality, you discovered the onerous means that day. A extra dependable method is to examine assets-under-management rankings and commerce solely on exchanges with clear, verifiable Proof of Reserves. These metrics reveal precise capital dedication slightly than manufactured exercise.
What Stress Truly Exposes
Actual liquidity solely turns into seen when markets are below stress. Three issues matter way over headline quantity.
Depth close to the mid value. This tells you ways a lot you may commerce with out shifting the market. Throughout regular circumstances, liquid pairs typically have significant dimension inside 10 to 25 foundation factors of mid. On October 10, that depth collapsed, leaving merchants dealing with value affect of 1% to three% on trades that will usually barely transfer the e book.
Unfold stability. When market makers step again, spreads widen. On that day, Bitcoin perpetual spreads blew out to roughly 26 foundation factors, greater than 1,200 occasions wider than standard.
Slippage. That is what merchants truly really feel. It combines each unfold and lacking depth. Even small market orders had been leaping a number of value ranges as they consumed what little liquidity remained.
All of this occurred on exchanges reporting file quantity. The difficulty was not exercise. It was capability.
Fragmentation Makes the Drawback Worse
Crypto liquidity in 2025 is scattered. Roughly 80% sits on centralized exchanges. The remainder lives on decentralized protocols. Inside every class, it’s break up throughout dozens of venues.
On paper, world liquidity seems monumental. In follow, merchants solely work together with the native order e book of the venue they’re utilizing. If that venue’s market makers pull again throughout stress, it doesn’t matter how a lot liquidity exists elsewhere.
The October crash made this painfully clear. Some exchanges saved functioning. Others noticed liquidity virtually utterly disappear. The distinction was not quantity, it was the standard of their market maker relationships and their means to maintain quotes reside when danger spiked.
How Actual Execution High quality Is Constructed
At Phemex, we constructed our Retail Worth Enchancment system for precisely these moments.
RPI is a maker-only liquidity layer that interacts solely with non-algorithmic retail circulation. By separating retail merchants from high-frequency methods, liquidity suppliers can quote tighter costs with out worrying about being picked off by quicker merchants.
After the December 2025 improve, depth inside ±0.1% of mid-price exhibits:
- BTCUSDT at 2× business benchmarks
- ETHUSDT at 5× common market liquidity
- SOLUSDT at 5.5× top-tier alternate requirements
- Throughout our prime 12 pairs, about 3× baseline depth
These numbers matter as a result of they signify executable liquidity, not simply reported turnover.
Preserving liquidity within the e book throughout volatility is not only about software program. It requires market maker commitments, danger techniques that permit them handle stock, and incentives tied to staying energetic when circumstances deteriorate.
What This Means for Merchants
As crypto turns into extra fragmented, the hole between quantity and actual execution high quality will solely develop.
On-chain perpetuals practically tripled in open curiosity in 2025. DEX volumes hit new data. Liquidity is all over the place, however hardly ever in a single place once you really want it.
For merchants, meaning trying past quantity. What issues is depth at your commerce dimension, unfold behaviour throughout latest volatility, and whether or not the venue has a observe file of staying liquid when markets are confused.
For exchanges, it means competing on execution infrastructure as an alternative of selling numbers. This method additionally permits us to function transparently as an A-book venue, the place all trades are routed to actual liquidity suppliers, versus many more recent exchanges that function B-book fashions.
Backside Line
The October liquidation occasion erased $19 billion in positions. However the deeper lesson was structural.
When markets had been calm, quantity seemed spectacular. When markets broke, it informed you nothing about whether or not you can commerce.
Depth, spreads, and slippage informed the reality.
Exchanges can both construct for that actuality, or await the following stress occasion to reveal the distinction.
We selected to construct.