$19B in liquidations. APIs crashing. Traders wiped out and winners auto-delevedged.
Here’s what really happened on Black Friday and why ADL became the invisible hand behind the chaos 👇🧵
1️⃣ The setup
Last Friday wasn’t just a dip.
It was one of the fastest and most violent liquidation cascades crypto has ever seen: over $19B in liquidations within 20 minutes.
Bitcoin dropped from $122K to $104K, and altcoins like $ATOM and $SUI got obliterated.
2️⃣ The trigger
It all started when Trump announced 100% tariffs on Chinese exports after Beijing restricted rare-earth materials.
Moments before that, huge shorts appeared on Hyperliquid right before the announcement.
Someone clearly knew something.
Then the dominoes fell...
3️⃣ Why it was so bad
The crash hit hardest on perp order books, not spot.
When the volatility exploded and API systems started failing, those few MMs literally couldn’t place orders.
No bids. No asks. Just a vertical drop to nothing.
4️⃣ Enter ADL: Auto-Deleveraging
ADL is what happens when the system runs out of ways to absorb losses.
When liquidations go beyond what insurance funds can handle, the exchange force-closes positions from profitable traders to offset the losses from the losing side.
5️⃣Here’s a money example
Trader A (short BTC) uses 50x leverage on a $1,000 position → controlling $50,000 of BTC.
Trader B (long BTC) also uses 50x leverage on a $1,000 position → controlling $50,000.
Now BTC spikes +10% in minutes.
Trader A’s position loses $5,000.
6️⃣But he only had $1,000 margin → he’s $4,000 underwater.
Normally, the liquidation engine sells his position early enough to prevent that.
But when the market moves too fast and liquidity vanishes, there’s a $4,000 hole.
7️⃣Who covers that $4,000?
👉 The insurance fund should.
But if thousands of traders are liquidated at once, that fund may not be enough.
So the system starts an ADL event:
It looks for traders on the other side (the longs) who made a lot of profit and are using high leverage.
8️⃣Trader B (the long) made $5,000 profit.
But the system needs $4,000 to cover A’s loss.
ADL will partially close B’s position automatically, selling part of his position at the mark price.
B keeps $1,000 profit, but loses the rest through no fault of his own.
1️⃣1️⃣Lighter: Experienced downtime after the chaos. The LLP pool took a hit instead of traders, so fewer users got ADL’d on the downside, but some were affected on the bounce back.
1️⃣2️⃣These two DEXes showed two philosophies:
🟢 Hyperliquid: “Protect capital at all costs.” Full uptime, but aggressive ADL.
🟣 Lighter: “Protect users first.” Some downtime, smaller LP losses, fewer forced ADLs.
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