Perpetual decentralized exchanges (Perp DEXes) recorded over $70 billion in daily trading volume amid a significant market sell-off with notable deleveraging in BTC, ETH, SOL, etc.
This marks the second-highest single-day volume ever for the sector. The all-time high remains October 10, 2025 often called the “10/10” or “1011” flash crash, when volumes hit around $101 billion some earlier reports cited ~$78 billion for on-chain perps specifically, but aggregated figures including the broader event pushed it higher.
That day was triggered by extreme volatility, resulting in over $19 billion in total liquidations across crypto markets—the largest single-day wipeout in history—driving massive forced unwinds and trading activity. For context on February 5: Hyperliquid led with ~$24.7 billion about 31% market share.
Register for Tekedia Mini-MBA edition 19 (Feb 9 – May 2, 2026).
Register for Tekedia AI in Business Masterclass.
Join Tekedia Capital Syndicate and co-invest in great global startups.
Register for Tekedia AI Lab.
Aster followed at ~$10–11.5 billion. edgeX ~$8.7 billion. Lighter ~$7.5 billion. These top platforms accounted for a majority of the total.
This surge highlights how Perp DEXes especially on-chain ones like Hyperliquid have matured and captured significant leverage trading flow, even during downturns, as traders seek decentralized alternatives amid volatility.
Flash crashes in Decentralized Finance (DeFi) refer to sudden, extreme price drops in cryptocurrency assets, often triggered by liquidity shortages, leveraged positions, or market manipulations, followed by rapid recoveries.
These events expose the interplay between high leverage, automated systems, and fragmented liquidity across centralized exchanges (CeFi) and DeFi protocols. Unlike traditional finance, where circuit breakers might halt trading, crypto markets often amplify crashes through cascading liquidations and oracle dependencies.
October 10-11, 2025 (The “10/10” Collapse): This remains the largest crypto flash crash, with over $19 billion in liquidations across CeFi and DeFi platforms. It began with a localized liquidity failure on Binance, where the stablecoin USDe traded as low as $0.65 due to a large sell order overwhelming the order book.
This triggered automated deleveraging, margin calls, and a feedback loop that devalued collateral, leading to widespread forced sells. Bitcoin dropped 14%, while altcoins fell steeper some by 60-80%.
The event highlighted how single-venue pricing can propagate risks to DeFi, where protocols like lending markets rely on oracles that may not account for such dislocations. A recent sell-off saw Perp DEXes hit $70 billion in trading volume, the second-highest ever, amid deleveraging in major assets like BTC, ETH, and SOL.
This caused brief but severe price wicks, liquidating “safe” borrow positions in DeFi lending platforms despite quick recoveries. The 2017 Ethereum flash crash on GDAX saw ETH drop from $300 to $0.10 in minutes due to stop-loss and margin liquidations.
More recently, Venus (XVS) plunged 30% in 10 minutes in January 2026, underscoring ongoing volatility in DeFi tokens. Flash crashes exacerbate DeFi’s inherent vulnerabilities, leading to widespread economic and structural damage.
Cascading Liquidations and User Losses
High leverage in protocols like lending on Aave and perpetuals amplifies drops. In October 2025, $16.8 billion in long positions were wiped out, with Hyperliquid alone handling $10.3 billion. This creates a domino effect: falling prices devalue collateral, triggering more liquidations, which further depresses prices.
Users face permanent capital loss, with sophisticated traders like basis traders hit hardest when hedges fail via auto-deleveraging. In DeFi, this can lead to $180 million in penalties on platforms like Aave if gaps persist.
Sharp swings increase risks of runs on stablecoins or protocols, as seen in Terra’s 2022 collapse attributed to Anchor protocol runs. Flash loans enable attackers to borrow massive sums instantly, manipulate oracles, and exploit compositions of protocols, leading to “flash crash for cash” scenarios where millions are drained.
Out of 10 multi-protocol attacks in 2020, nine were flash-loan funded oracle manipulations. DeFi’s reliance on oracles assumes fair value from secondary markets, but crashes reveal flaws in tokens like USDe or LRTs, where value depends on reserves and redemptions.
Blockchain congestion delays transactions, incentivizing pre-emptive runs. Liquidity mismatches and leverage create fire-sale risks, potentially spilling to traditional finance via stablecoin reserves.
Centralized dependencies like one exchange dominating price discovery undermine decentralization, turning DeFi into “dependency finance.” Crashes wipe out market makers up to 33% in October 2025, delay recoveries, and erode trust, leading to capital outflows and reduced participation.
They also expose smart contract vulnerabilities, increasing exploit frequency. While destructive, flash crashes serve as stress tests, fostering resilience and innovation: DeFi platforms like Uniswap handled $9 billion in volume with zero downtime in recent crashes, while Aave automated $180 million in liquidations efficiently.
Crashes like October 2025 deleveraged overleveraged markets, paving the way for healthier rallies post-2021 drawdowns preceded booms. Over 90% of positions in some protocols survived, validating designs like crvUSD’s peg stability.
Events highlight needs for better oracles; integrating proof-of-reserves and risk layers, circuit breakers, and adaptive designs to mitigate cascades. They push for real-time attestations, application-specific pricing, and shared standards among issuers and integrators.
Post-crash, DeFi has matured, capturing more leverage trading flow via on-chain alternatives. Quick rebounds allow savvy traders to capitalize, and crashes weed out weak protocols, strengthening the ecosystem overall.
Flash crashes inflict immediate pain through liquidations and volatility but ultimately refine DeFi by exposing flaws and incentivizing robust, decentralized solutions. As the sector scales, addressing leverage and oracle risks will be crucial to prevent systemic failures.