On October 10, 2025, a flash crash swept through crypto markets, triggering the largest single-day liquidation event on record, with approximately $19 billion in positions wiped out. On the Hyperliquid platform alone, over 6,300 wallets were liquidated. The crash exposed the auto-deleveraging (ADL) mechanism, which forcibly closes winning traders’ positions to cover losses when a platform’s insurance fund runs dry. This situation has sparked a fierce debate within the industry over who should absorb losses during market collapses. Centralized platforms like Binance can draw from their corporate reserves to compensate users, while decentralized platforms must solve this problem solely through code and mechanism design.
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