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|5 min Read30 Seconds to Zero: The Oct 11 Market Maker Massacre
Carter Hayes
Senior Analyst
Published
Jan 16, 2026
On October 11, 2025, crypto posted its largest liquidation day in history. Total forced liquidations are estimated at 20–30 billion dollars as altcoins dropped 50% in a single session and some pairs went effectively to zero.
ZeroDivision, a three-hundred-million-dollar market-making shop running neutral strategies across major venues, thought they were hedged. Instead, they woke up to ADL(Auto-Deleveraging) triggers, empty order books and a one-day drawdown of 20–30% – with more aggressive peers losing half their equity or disappearing entirely.
The episode is a live stress test of perpetuals, insurance funds and ADL design on venues like OKX, Binance and Bybit – and a preview of how liquidity can simply switch off in a fragmented, levered market.
From “Always Neutral” To 30% Down In A Day
ZeroDivision runs fully automated, market-neutral strategies: delta-hedged books across spot and perps, basis trades on funding and term structure, LST carry, options vol spreads, and exchange liquidity provision rebates. In normal crashes like 3/12 or 5/19, they barely lose money because every long is matched with a short.
On 10/11, the pattern broke. Bitcoin started sliding in the early hours. Around 5 a.m., OKX fired ADL on FIL and DOGE perps; USDe, BNSOL, WBETH and other names were already selling off hard. The system flipped into “protection mode” – no new positions, only managing existing risk – but that was not enough. Stablecoin depegs and cross-venue dislocations fell outside what their risk rules were built to handle, and, crucially, the exchanges did not have enough live liquidity to let them unwind size at sane prices.
Meanwhile, interface latency spiked across venues. On Binance, portfolio-margin accounts under liquidation cannot trade at all, so even professional desks were locked out while the engine unwound them. For a neutral shop, that means ADL and liquidations can move one side of the hedge while the other side is frozen, turning a flat book into unhedged PnL exposure in seconds.
When ADL Fires Into An Empty Order Book
The core of the 10/11 damage was not price direction, it was microstructure.
On OKX’s FIL coin-margined perp, ZeroDivision’s post-mortem order-book snapshots show liquidity disappearing for roughly thirty seconds during ADL. Offers sat around 0.8, bids collapsed to roughly 0.2. At that moment, ADL bought back their profitable short at 0.8. To stay neutral, their system immediately tried to re-short – but in an order book where the only real bid was 0.2.
Result: same notional exposure, four-times worse entry price, and a massive realized loss created purely by the interaction of ADL and a broken book.
By contrast, Binance and Bybit protected trade prices off index feeds when books drifted too far, but introduced different failure modes. On Binance, BNSOL, USDe and WBETH lost their pegs and small-cap liquidity dried up, yet BTC/ETH/SOL books remained deep. During forced liquidations, PM accounts were locked, so positions were closed by the engine, and only when control returned could the desk rebuild hedges – at new prices. Time mismatch, not just spread, turned into a PnL hit.
Across venues, the story was similar: where there was depth, neutral strategies survived; where ADL met air pockets, losses exploded.
Who Blew Up – And What The Market Looks Like Now
For ZeroDivision, the initial hit across venues was roughly 20–30% of equity, even though they had no directional bets on BTC or majors. More conservative market makers reported 10–20% drawdowns. Aggressive or directional firms, especially those leaning on leverage and illiquid altcoins, saw 40–50% losses or outright bankruptcy.
The pattern is clear in their post-event review: The trigger was not only USDe and LST depegs; even names like FIL and DOGE, which were assumed “safe enough,” turned out to carry lethal liquidity risk under stress.
ADL design and transparency matter. Very few exchanges disclose real-time insurance-fund levels, hole sizes or ADL queues. Routing forced unwinds into thin books without price protection is effectively a tax on whoever is still quoting.
Fragmentation makes everything worse. Where ten desks used to fight over the same majors, now each desk runs inventories across dozens of long-tail perps. Depth is thinner everywhere, so when one venue’s risk engine overreacts, there is no army of arbitrageurs ready to close the gap.
Post-10/11, open interest is down, spreads are wider, and many desks have cut leverage, shrunk alt exposure or exited entirely. Neutral shops that once assumed “ADL only hits degen apes” now treat exchange-side risk as a first-class factor, on par with price and volatility.
The lesson of 10/11 is blunt: in a high-leverage perp ecosystem, your true counterparty is not the trader on the other side of the book, it is the exchange’s risk engine. When that engine starts liquidating into a vacuum, even the most carefully hedged market maker can be turned into exit liquidity in under a minute.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.