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Why Crypto Liquidity Suddenly Dried Up
Pulse of the market
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Market makers are the invisible backbone of crypto trading, providing constant buy and sell liquidity while hedging risk. During the October crash, however, auto-deleverage mechanisms forcibly closed their short hedges, leaving them exposed to falling spot prices with no protection. The result was panic-driven liquidity withdrawal.
By Q4, global order books had thinned to their weakest levels since 2022. BitMEX described this moment as a fundamental breach of the “neutrality” promise market makers relied on, triggering a widespread retreat from risk. The crash didn’t just move prices — it rewired market behavior.
