$19B in liquidations. APIs crashing. Traders wiped out and winners auto-delevedged.
Hereās what really happened on Black Friday and why ADL became the invisible hand behind the chaos šš§µ
1ļøā£ The setup
Last Friday wasnāt 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.
2ļøā£ 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...
3ļøā£ 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 couldnāt place orders.
No bids. No asks. Just a vertical drop to nothing.
4ļøā£ 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.
5ļøā£Hereās a money example
Trader A (short BTC) uses 50x leverage on a $1,000 position ā controlling $50,000 of BTC.
Trader B (long BTC) also uses 50x leverage on a $1,000 position ā controlling $50,000.
Now BTC spikes +10% in minutes.
Trader Aās position loses $5,000.
6ļøā£But he only had $1,000 margin ā heās $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, thereās a $4,000 hole.
7ļøā£Who covers that $4,000?
š 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.
8ļøā£Trader B (the long) made $5,000 profit.
But the system needs $4,000 to cover Aās loss.
ADL will partially close Bās 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.
1ļøā£1ļøā£Lighter: Experienced downtime after the chaos. The LLP pool took a hit instead of traders, so fewer users got ADLād on the downside, but some were affected on the bounce back.
1ļøā£2ļøā£These two DEXes showed two philosophies:
š¢ Hyperliquid: āProtect capital at all costs.ā Full uptime, but aggressive ADL.
š£ Lighter: āProtect users first.ā Some downtime, smaller LP losses, fewer forced ADLs.
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