Last Friday, the crypto market faced its most significant liquidation event, wiping out over $19 billion in leveraged positions and affecting more than 1.6 million traders in just one day.
This collapse ignited discussions about the transparency differences between centralized exchanges (CEXs) and decentralized finance (DeFi) systems.
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Onchain Advocate Highlights “Underreported” CEX Liquidations
Jeff, a co-founder of the on-chain exchange Hyperliquid, stated that true transparency—which allows anyone to verify transactions on-chain—explains why DeFi provides fairness and open auditing that CEXs lack.
“Hyperliquid’s fully onchain liquidations cannot be compared with underreported CEX liquidations,” wrote Jeff. “Every order, trade, and liquidation occurs onchain. Anyone can verify the system’s balance and fair execution in real-time. Some CEXs underreport user liquidations by as much as 100 times.”
He emphasized that transparency and real-time proof of reserves should be fundamental principles for global markets. Hyperliquid plans to activate its HIP-3 upgrade, enabling anyone to launch a futures DEX.
It’s official:
Crypto just experienced its LARGEST liquidation event in history with 1.6 MILLION traders liquidated.
Over $19 BILLION worth of leveraged crypto positions were liquidated in just 24 hours, 9 TIMES the previous record.
What caused this? Let us explain.
(a thread) pic.twitter.com/dHbkfNjrVs
— The Kobeissi Letter (@KobeissiLetter) October 11, 2025
The liquidation wave was triggered by Trump’s 100 percent tariffs on Chinese goods, leading to a rapid sell-off and a $20,000 swing in Bitcoin, resulting in a $380 billion market-cap shock.
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Market Reactions and Reforms
Backpack Exchange founder Armani Ferrante noted that the crash revealed “very real, very serious market flaws.” He explained that liquidity disappeared almost immediately. Backpack, designed to remain neutral, does not have its own market maker, unlike the FTX model, which failed during frozen markets. He suggested the implementation of vault tools and circuit breakers, commending Hyperliquid’s system for enhancing solvency.
Meanwhile, Haseeb Qureshi explained that Ethena’s USDe “did not depeg.” He attributed a Binance-only flash crash to malfunctioning oracles and API failures. OKX executive Star, however, asserted that Ethena’s transparency “should set a benchmark,” but cautioned that USDe “is a tokenized hedge fund, not a 1:1 stablecoin.”
Some accused Binance of briefly freezing withdrawals during the turmoil. Co-founder He Yi replied that systems “remained stable” despite brief delays and confirmed over $280 million in compensation, which BeInCrypto later confirmed.
Analyst Kyle observed that the upheaval shifted focus from “DEX vs CEX” to competition among exchanges such as Bybit and Binance. His perspective aligned with studies indicating that CEXs are evolving into regulated platforms targeting IPOs and fees, while DEXs expand through quicker, custody-free trading.
Perpetual DEXs processed over $2.6 trillion in 2025, spearheaded by Hyperliquid and Aster. However, regulators cautioned that unchecked leverage and “illusory decentralization” could render them systemically risky.
A Turning Point for Crypto Markets
The $19 billion cascade may signify a crucial turning point for the crypto landscape. It underscored that liquidity—previously confined within centralized systems—has to become programmable and verifiable. Exchanges hurrying to validate reserves on-chain and DeFi protocols incorporating Oracle safeguards indicate a clear pivot: trust is transitioning from platforms to code.
In the end, the $19 billion wipeout accentuated the broadening transparency gap. Until CEXs adopt verifiable on-chain liquidation systems and DEXs address their transparency deficits, trust—not leverage—remains the weakest asset in crypto.
