Written by: Wintermute
Translated by: Golden Finance xiaozou
Last Friday, the United States announced a 100% tariff on all imports from China starting November 1, triggering a risk-averse trend across major markets. The S&P 500 index fell by 2.9%, the VIX (fear index) surged from 16 to 22, and the ten-year yield dropped from 4.14% to 4.05%. Investors rushed to de-risk, shifting towards defensive allocations, leading to a rise in gold prices. Digital currencies also suffered heavy losses, with the total amount of open contracts reaching $220 billion before the event, and within just a few hours, $19 billion in leveraged positions were liquidated, setting a record for the largest single-day liquidation in history.
Here are our observations on the spot perpetual contracts and options market.
1. Spot Market
Based on data aggregated from centralized exchanges, we observed a rapid and synchronized sell-off, with most trading pairs on centralized exchanges hitting bottom within 55 minutes (UTC time 20:40 to 21:35), and the severe price fluctuations quickly led to a depletion of overall market liquidity. As prices rebounded from the lows, liquidity returned rapidly.
According to aggregated exchange data for the top 50 cryptocurrencies, we observed:
The median drawdown reached -54%, with over 90% of tokens experiencing declines of more than 10%. BTC (-11%) and ETH (-13%) showed the strongest resilience, while small and mid-cap assets saw declines of 60-80% at peak times.
Nearly all tokens hit bottom around UTC time 21:20 during the global liquidation wave, followed by a sharp rebound as forced selling positions were closed, with an average rebound of +84% within 30 minutes.
Losses were negatively correlated with market capitalization: based on the GMCI30 index, large-cap coins averaged a decline of about -27%, while small-cap coins averaged a decline of -52%. The order book conditions returned to normal within an hour, with funds flowing back into BTC, ETH, and major layer one network tokens, while small-cap coins lagged in their rebound.
The overall depth of buy and sell orders on centralized exchanges dropped by about 65% during the low point, but as the frequency of quotes and spreads returned to normal, it recovered to over 90% of pre-event levels within 35 minutes. During this period, although liquidity was provided, the spread between quotes and the mid-price significantly widened.
2. Options Market
After the shock from the U.S. tariff policy triggered market panic on Friday, BTC futures positions quickly shifted to a defensive stance, with traders scrambling for downside protection, pushing total options trading volume to a record high.
The data covers 24-hour activity during the tariff headlines and market sell-off, with panic hedging dominating the flow of funds, and short-term put options being actively bid. By Saturday, market sentiment shifted, and as BTC stabilized around $115,000, trading strategies turned to volatility harvesting and range trading, profiting from selling call options and shorting calendar spreads.
Volatility surged due to increased demand for hedging, with the 7-14 day implied volatility jumping by 20-25 points, and put options with strike prices of $105,000 to $115,000 trading at a premium of 10-15 volatility points over call options, marking one of the largest single-day increases in front-end options on record.
Options trading volume hit a new high, primarily concentrated in contracts expiring in October, with about 70% of premiums flowing into put options below $115,000, highlighting strong demand for downside protection. The 24-hour trading volume on the Deribit platform doubled compared to previous records.
On Saturday, the flow of funds reversed to volatility selling, with traders selling call options and straddles in the $118,000 to $130,000 range, pushing the one-week implied volatility down from 63% to 51%, indicating that the market quickly assessed the tariff impact as a short-term disturbance.
3. Perpetual Contracts Market
During Friday's market crash, both centralized and decentralized perpetual contracts markets faced extreme tests, with hundreds of millions in leveraged positions liquidated within minutes. Centralized exchanges experienced record liquidation volumes and a brief liquidity gap, while on-chain DEX perpetual contracts faced pressure from liquidation systems and funding pools, yet mainstream DEX platforms maintained normal operations and solvency throughout. This event served as a real-world stress test for the resilience of on-chain trading and margin systems.
Due to some users employing long-short spread strategies, their short positions faced automatic deleveraging (ADL), causing holdings to temporarily deviate from a neutral state, and subsequently, long positions faced liquidation as prices continued to fall. The Hyperliquid platform saw over 1,000 wallets automatically deleveraged, which may have been one of the triggers for this chain liquidation event.
Taking HYPE, which experienced the most severe liquidation across the network, as an example, its liquidation amount reached $10.3 billion:
- This liquidation triggered the first cross-margin automatic deleveraging (ADL) event on mainstream DEX perpetual contract platforms, where the mechanism works to mitigate risk by closing part of the profitable positions when the backup funding pool is exhausted.
- Gas usage surged to a historical peak of 105K, about three times the daily average since March, and doubled the previous high record, reflecting the surge in on-chain liquidation and trading activity during the event.
Now, let's look at the situation on centralized exchanges:
Open contracts were severely impacted, with most contracts shrinking by about half during the crash, indicating a comprehensive leverage shock.
Funding rates sharply turned negative, driven by liquidation rather than position adjustments. Only partial recovery occurred over the weekend, with most tokens among the top 100 still having funding rates below average levels.
All of this serves as a reminder: in the cryptocurrency market, risk management and leverage control are crucial, and one must be prepared for unexpected events.
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