The massive crypto crash in October decimated market makers, ending an era where crypto traders were able to make easy money, says crypto exchange BitMEX.
The crash between Oct. 10 and 11 wiped out $20 billion in the “most destructive event for sophisticated market makers in crypto history,” BitMEX said in its State of Crypto Perpetual Swaps in 2025 report released on Thursday.
A feedback loop of auto-deleveraging, where exchanges liquidate profitable, leveraged positions to cover themselves and prevent further losses, broke the market makers’ “‘safe’ delta-neutral strategies,” forcing them to pull liquidity and leave orderbooks at multi-year lows, BitMEX said.
“For years, perpetual swaps have been a great source of alpha for yield: farm the funding, capture the spread, and trust the exchange engine to maintain the walls,” it added. “That era of easy yield and structural stability appeared to end in 2025.”
Thinnest crypto order books since 2022
Market makers are critical to ensuring there are always counterparties for trades. They usually hold crypto and bet against, or short, the token to minimize risk.
When auto-deleveraging mechanisms during the October crash forcibly closed the market makers’ short hedges, they were left holding “naked spot bags in a free-falling market.”
“This breach of the ‘neutrality’ promise caused MMs [market makers] to pull liquidity globally in Q4, resulting in the thinnest orderbooks seen since 2022,” BitMEX said.
BitMEX said that the strategy, where traders could arbitrage between the spot and futures markets, “has become overcrowded” with funding rates dropping to 4%, “killing the funding rate trade” and underperforming Treasury bills.
Market makers split, while users move to on-chain perps
Meanwhile, BitMEX added that last year also saw the market split into “fair matchers” and “predatory B-Book exchanges,” where the platform operates as a market maker and has “‘abnormal trading’ clauses to void profitable trades.”
“It became clear that aggressive B-Book operations were taking the other side of user trades and refusing to pay out when they lost,” BitMEX said.
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BitMEX also noted that crypto trading volumes “migrated aggressively to high-performance Perp DEXs like Hyperliquid,” but warned that decentralization is not the solution for market manipulation.
It said that the Plasma (XPL) token launch in September gave attackers a “liquidation map” and saw illiquid pre-launch tokens with no price oracle being manipulated to trigger liquidations on on-chain perp positions.
BitMEX argued the attack “demonstrated that on-chain transparency cannot protect users as much as credible [centralized exchanges] can.”
“The failure of unproven, high-risk platforms has cleared the air for battle-tested exchanges and genuine innovations to thrive,” it said.
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