October Crash Ends Easy Yield Era for Crypto Market Makers, BitMEX Says

The crypto market crash between Oct. 10 and Oct. 11 wiped out $20 billion and marked what BitMEX described as the most destructive event for professional market makers in crypto history. In its State of Crypto Perpetual Swaps in 2025 report, BitMEX said the selloff ended a long period where traders could earn steady returns using low-risk strategies.

According to the exchange, the crash triggered a chain reaction across derivatives markets. Auto-deleveraging systems stepped in as prices fell, forcing exchanges to close profitable leveraged positions to protect themselves. That process broke the core assumption behind market makers’ delta-neutral setups, which were designed to stay flat to price moves.

Once those hedges failed, losses accelerated.

Auto-Deleveraging Forces Liquidity Exit

Market makers typically hold spot assets while shorting futures to neutralize risk. During the October crash, auto-deleveraging closed those short positions first. That left market makers exposed to falling spot prices with no hedge in place.

BitMEX said this turned “safe” strategies into direct directional bets during a fast selloff. As a result, liquidity providers pulled back across exchanges. By the fourth quarter, global order books thinned to their lowest levels since 2022.

The pullback marked a clear break from prior years, when exchanges were trusted to maintain stable liquidation engines. BitMEX said that trust no longer held after October.

Funding Trades Face Weekness

The crash also exposed weakness in the popular funding-rate trade, where traders arbitrage price differences between spot and perpetual futures. BitMEX said the strategy had become overcrowded well before the crash.

By late 2025, average funding yields fell to around 4%, below returns offered by short-term U.S. Treasury bills. The trade no longer compensated for the risk of exchange-level liquidation mechanics.

BitMEX concluded that the long-running model of farming funding and capturing spreads “ended in 2025.”

Trading Splits as Volume Moves On-Chain

BitMEX said the market has since split between exchanges that act as neutral matchers and those running B-Book models, where platforms take the opposite side of user trades. Some of those platforms also reserve the right to cancel profitable trades under “abnormal trading” clauses.

As trust weakened, trading volume shifted toward on-chain perpetual exchanges such as Hyperliquid. However, BitMEX warned that transparency alone does not prevent abuse.

The Plasma (XPL) token launch in September exposed risks unique to on-chain perps. Attackers manipulated illiquid pre-launch prices to trigger liquidations, using transparent data as a roadmap.

BitMEX said the failures of high-risk platforms have reset the market.