Billion-dollar liquidation events are no longer rare in crypto markets. While these crashes often appear suddenly, on-chain data, leverage positioning, and technical signals usually reveal stress long before forced selling begins. This article examines whether reconstructing major historical events can help anticipate liquidation cascades.

Keep reading on for early signals and how to read them together. Throughout this piece, we analyze two major events: October 2025 (long liquidation cascade) and April 2025 (short squeeze), and trace the signals that appeared before both. The focus remains primarily on Bitcoin-specific metrics, as it still accounts for nearly 60% (59.21% at press time) of total market dominance.

October 10, 2025 — The Largest Long Liquidation Cascade Came With Signs

On October 10, 2025, more than $19 billion in leveraged positions were taken out, making it the largest liquidation event in crypto history. Although US–China tariff headlines are often cited as the trigger, market data show that structural weakness was around for weeks. The majority of these liquidations were long-biased, almost $17 billion.

Price Extension and Leverage Expansion (Sep 27 → Oct 5)

Between September 27 and October 5, Bitcoin rallied from around $109,000 to above $122,000, eventually testing the $126,000 area. This rapid move strengthened bullish sentiment and encouraged aggressive long positioning.

During the same period, open interest rose from roughly $38 billion to more than $47 billion. Leverage was expanding fast, indicating growing dependence on derivatives.

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Gracy Chen, the CEO of Bitget, said modern market structure makes leverage far more synchronized than in earlier cycles.

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“Positions are built and unwound faster, across more venues… leverage behaves more synchronously… When stress hits, the unwind is sharper, more correlated, and less forgiving,” she added.

At the same time, exchange inflows fell from around 68,000 BTC to near 26,000 BTC. Holders were not selling into strength. Instead, supply stayed off exchanges while leveraged exposure increased.

This combination reflected a late-stage rally structure.

At this stage of the cycle, rising leverage or open interest, for that matter, not only increases trader risk. It also raises balance-sheet and liquidity pressure on exchanges, which must ensure they can process liquidations, withdrawals, and margin calls smoothly during sudden volatility.

When asked how platforms prepare for such periods, Chen, said risk management starts long before volatility erupts:

“Holding a strong BTC reserve is a risk management decision before it’s a market view… prioritize balance-sheet resilience… avoid being forced into reactive moves when volatility spikes…,” she said

Profit-Taking Beneath the Surface (Late Sep → Early Oct)

On-chain profit data showed that distribution had already begun.

From late September into early October, Spent Output Profit Ratio (SOPR), which tracks whether coins are sold at profit or loss, went up from around 1.00 to roughly 1.04, with repeated spikes. This indicated that more coins were being sold at a profit.

Importantly, this happened while exchange inflows remained low. Early buyers (possibly already exchange-held supply) were quietly locking in gains without triggering visible selling pressure. And BTC was already at an all-time high during that time.

This pattern suggests a gradual transfer from early participants to late entrants, often seen near local tops.

Short-Term Holders Flip From Capitulation to Optimism (September 27 → Oct 6)

Short-term holder NUPL (Net Unrealized Profit/Loss), measuring paper profits or losses. provided one of the clearest warning signals. On September 27, STH-NUPL stood near -0.17, reflecting recent capitulation. By October 6, it had surged to around +0.09.

In less than ten days, recent buyers moved from heavy losses to clear profits.

Such rapid transitions are dangerous. After emerging from losses, traders often become highly sensitive to pullbacks and eager to protect small gains, increasing the risk of sudden selling.

As sentiment improved, leverage continued rising. Open interest reached one of its highest levels on record while SOPR and NUPL began rolling over. BTC exchange inflows remained subdued, keeping risk concentrated in derivatives markets.

Instead of reducing exposure, traders increased it. This imbalance made the market structurally weak.

Momentum Weakens Ahead of the Breakdown (July → October)

Technical momentum had been deteriorating for months. From mid-July to early October, Bitcoin formed a clear bearish RSI divergence. Price made higher highs, while the Relative Strength Index, a momentum indicator, made lower highs.

This signaled weakening demand beneath the surface. By early October, the rally was increasingly sustained by leverage rather than organic buying, and the momentum indicator proved it.

Defense Phase and Structural Breakdown (Oct 6 → Oct 9)

After October 6, price momentum faded, and support levels were tested. Despite this, open interest remained elevated, and funding rates, which reflect the cost of holding future positions, stayed positive. Traders were defending positions rather than exiting, possibly by adding margin.

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Chen also mentioned that attempts to defend positions often amplify systemic risks:

“When positions approach liquidation, traders often add margin… Individually, that can make sense. Systemically, it increases fragility… Once those levels fail, the unwind is no longer gradual — it becomes a cascade,” she highlighted as the root cause for massive cascades.

More margin eventually led to a deeper crash.

October 10 — Trigger and Cascade

When tariff-related headlines emerged on October 10, the weak structure collapsed.

Price broke lower, leveraged positions moved into loss, and margin calls accelerated. Open interest fell sharply, and exchange inflows surged.

Forced short selling created a feedback loop, producing the largest liquidation cascade in crypto history.

Stephan Lutz, CEO of BitMEX, said liquidation cycles tend to appear repeatedly during periods of excessive risk-taking, in an exclusive quote to BeInCrypto:

“Normally, liquidations always come with cycles amid greedy times… they are good for market health…,” he mentioned.

Chen cautioned that liquidation data should not be mistaken for the root cause of crashes.

“Liquidations are… an accelerant, not the ignition… They tell you where risk was mispriced… how thin liquidity really was underneath, she said.”

Could This Long Liquidation Cascade Have Been Anticipated?

By early October, several long squeeze warning signs were already visible:

• Rapid price extension from late September
• Open interest near record levels
• Rising SOPR, indicating profit-taking
• STH-NUPL flipping positive in days
• Low exchange inflows concentrate risk in derivatives
• Long-term RSI divergence

Individually, these signals were not decisive. Together, they showed a market that was overleveraged, emotionally unstable, and structurally weak.

Lutz added that recent cascades have also exposed weaknesses in risk management.

“This cycle’s criticism isn’t much on leverage itself, but risk management and the lack of rigorous approach…”

The October 2025 collapse followed a clear sequence:

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Price extension → Open interest expansion → Rising SOPR (selective profit-taking) → Rapid NUPL recovery (short-term optimism) → Long-term RSI divergence (weakening momentum) → Leverage defense through margin → External catalyst → Liquidation cascade

April 23, 2025 — How a Major Short Liquidation Cascade Came With Hints

On April 23, 2025, Bitcoin surged sharply, triggering more than $600 million in short liquidations in a single session. While the rally appeared sudden, on-chain and derivatives data show that a fragile market structure had been forming for weeks after the early-April sell-off.

Early Technical Reversal Without Confirmation (Late Feb → Early April)

Between late February and early April, Bitcoin continued making lower lows. However, on the 12-hour chart, the Relative Strength Index (RSI), a momentum indicator, formed a bullish divergence, with higher lows even as the price declined. This signaled that selling pressure was weakening.

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Despite this, exchange outflows, which measure coins leaving exchanges for storage, continued falling. Outflows dropped from around 348,000 BTC in early March to near 285,000 BTC by April 8.

This showed that dip buyers were hesitant and that accumulation remained limited. The technical reversal was largely ignored.

Bearish Positioning After the April 8 Low (Early → Mid April)

On April 8, Bitcoin formed a local bottom near $76,000. Instead of reducing risk, traders increased bearish exposure. Funding rates turned negative, indicating a strong short bias. At the same time, open interest, the total value of outstanding derivatives contracts, rose toward $4.16 billion (Bybit alone).

This showed that new leverage was being built primarily on the short side. Most traders expected the bounce to fail and prices to move lower.

Exchange outflows continued declining toward 227,000 BTC by mid-April, confirming that spot accumulation remained weak. Both retail and institutional participants stayed bearish.

Selling Exhaustion on Chain (April 8 → April 17)

On-chain data showed that selling pressure was fading.

The Spent Output Profit Ratio (SOPR) was near or below 1 and failed to sustain profit/loss spikes. This indicated that loss-driven selling was slowing, even when buying was not picking pace. That’s a classic bottom sign.

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Short-term holder Net Unrealized Profit/Loss (STH-NUPL), which measures whether recent buyers are in profit or loss, remained in negative territory. It stayed in the capitulation zone with only shallow rebounds, reflecting low confidence and limited optimism.

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Together, these signals showed exhaustion rather than renewed demand.

Compression and Structural Imbalance (Mid April)

By mid-April, Bitcoin entered a narrow trading range. Volatility declined, while open interest remained elevated and funding stayed mostly negative. Shorts were crowded, yet prices failed to break lower and began stabilizing instead.

With selling pressure fading (SOPR stabilizing) but no meaningful spot accumulation emerging (weak outflows), the market became increasingly dependent on derivatives positioning. Buyers remained hesitant, while bearish leverage continued rising against weakening downside momentum. This imbalance made the market structurally unstable.

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April 23 — Trigger and Short Squeeze

By April 22–23, STH-NUPL moved back toward positive territory (shown earlier), showing that recent buyers had returned to small profits. Some holders were now able to sell into strength, while many traders still treated the rebound as temporary and added short exposure.

Notably, a similar NUPL rebound had appeared before the October 2025 long flush. The difference was context. In October, short-term holders turning profitable encouraged more long positioning as traders expected further upside. In April, the same return to small profits encouraged more short positioning, as traders in a corrective market viewed the rebound as temporary and bet on another decline.

This combination tightened liquidity and increased bearish positioning. When prices pushed higher, stop losses were triggered, short covering accelerated, and open interest dropped sharply. Forced buying created a feedback loop, and a positive tariff-related tweet helped, producing one of the largest short liquidation events of 2025.

🚨 TRUMP MAY CUT CHINA TARIFFS TO EASE TENSIONS

The Trump administration is weighing major tariff cuts on Chinese imports—possibly by over 50%—to reduce trade tensions, sources say. No final decision has been made, and options remain open.

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One idea is a tiered system:

🔸 35%…

— *Walter Bloomberg (@DeItaone) April 23, 2025

Could This Short Squeeze Have Been Anticipated?

By mid-April, several warning signs were visible:

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• Bullish RSI divergence from late February
• Persistently negative funding rates
• Rising open interest after the April low
• Weak exchange outflows and limited accumulation
• SOPR stabilizing near 1
• STH-NUPL stuck in capitulation

Individually, these signals appeared inconclusive. Together, they showed a market where shorts were crowded, selling was exhausted, and downside momentum was fading.

The April 2025 squeeze followed a clear sequence:

Momentum divergence → disbelief → short buildup → selling exhaustion (SOPR exhaustion) → price compression → positioning imbalance → short liquidation cascade.

Reflecting on repeated liquidation cycles, Chen said trader behavior remains remarkably consistent.

“Periods of low volatility trigger overconfidence… Liquidity is mistaken for stability… Volatility resets expectations… Each cycle clears excess leverage,” she added.

What These Case Studies Reveal About Future Liquidation Cascade Risk

The October 2025 and April 2025 events show that measurable changes in leverage and on-chain behavior led to the large liquidation cascades. Importantly, these cascades do not occur only at major market tops or bottoms. They form whenever leverage becomes concentrated and spot participation weakens, including during relief rallies and corrective bounces.

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In both cases, these signals emerged 7–20 days before liquidation peaks.

In October 2025, Bitcoin rose from about $109,000 to $126,000 in nine days while open interest expanded from roughly $38 billion to over $47 billion. Exchange inflows fell below 30,000 BTC, SOPR rose above 1.04, and short-term holder NUPL moved from -0.17 to positive within ten days. This reflected rapid leverage growth and rising optimism near a local peak.

In April 2025, Bitcoin bottomed near $76,000 while funding stayed negative and open interest rebuilt toward $4.16 billion. Exchange outflows declined from around 348,000 BTC to near 227,000 BTC. SOPR remained near 1, and STH-NUPL stayed negative until just before the squeeze, showing selling exhaustion alongside growing short exposure.

Despite different market phases, both cascades shared three features. First, open interest increased while spot flows weakened. Second, funding remained strongly one-sided for several days. Third, short-term holder NUPL shifted rapidly shortly before forced liquidations. And finally, if a reversal or a bounce setup surfaces on the technical chart, the liquidation cascade tracking becomes clearer.

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These patterns also appear during mid-trend pullbacks and relief rallies. When leverage expands faster than spot conviction and emotional positioning becomes one-sided, liquidation risk rises regardless of price direction. Tracking open interest, funding, exchange flows, SOPR, and NUPL together provides a consistent framework for identifying these vulnerable zones in real time.