Perpetual contract crash triggers liquidity crisis: market makers forced to withdraw, annualized returns drop below 4%

GasFeeLady · 2026-01-08T12:40:10+00:00

The cryptocurrency market has recently experienced intense volatility, with approximately $20 billion in liquidations causing market makers to withdraw liquidity, and order book depth dropping to its lowest level since 2022. This turmoil has changed the market landscape, with players relying on arbitrage strategies facing difficulties, while platforms using the B-book model profit amid the chaos. The DeFi market is susceptible to manipulation, whereas the traditional financial perpetual contract market has seen growth.

GasFeeLady

2026-01-08 12:40:10

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[Crypto World] A recent wave of intense volatility has exposed the fragility of the crypto market. When the automatic deleveraging (ADL) mechanism is triggered, the market makers’ short positions used for hedging face forced liquidation, catching them off guard and forcing them to hold large unhedged spot positions. The scope of this shockwave is beyond imagination—approximately $20 billion in cascading liquidations has destroyed the neutral strategies that market makers rely on for survival.

Even worse, this turmoil has completely changed the market landscape. Market makers have been forced to withdraw liquidity from global markets, causing order book depth to fall to its lowest level since 2022. Those who once relied on funding rate arbitrage to make easy profits—Delta neutral strategy players—are beginning to struggle— as a flood of imitators enters, this “gold mine” is gradually drying up, with annualized returns dropping below 4%.

Interestingly, platforms operating in B-book mode have laughed last, gaining substantial profits amid this chaos. Meanwhile, the DeFi perpetual contract market remains susceptible to manipulation, whereas the traditional financial perpetual contract market has experienced explosive growth. The market is undergoing a reshuffle.

DEFI-0,07%

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BasementAlchemist

· 01-10 20:20

Market makers took a pretty heavy loss this time... 20 billion directly gone, feels like watching a butterfly effect Delta neutral can still earn less than 4%? Turns out we all got caught up in it The B-book crowd are the real winners, lying back and counting money

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PanicSeller

· 01-10 10:07

20 billion liquidation, market makers directly GG, this is called market clearing haha Delta arbitrage 4%, and people are still playing? They should have died long ago B-book traders are laughing their heads off, retail investors' money just flows in like this Perpetual contracts, at its core, is still a gamble Once ADL is triggered, no one can save you. Please understand clearly, everyone

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CounterIndicator

· 01-08 13:09

Oh my, a 20 billion liquidation caught market makers off guard, this is the real liquidity crisis. The arbitrage gold mine for the big brothers turned from easy profit to laying flat overnight, with an annualized 4%, I couldn't help but laugh. B-book traders are really just sitting back and watching the tiger fight, the bigger the chaos, the more they profit. Once ADL is triggered, the entire market has to be rewritten; the order book depth is so feeble, it's truly outrageous. Perpetual contract defaults, this time even those supposedly stable strategies have been exposed. It feels like the market's fragility is much more delicate than we imagined.

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ContractTester

· 01-08 13:03

20 billion liquidation, liquidity fleeing, market makers directly say "you're experienced"... This is just the routine operation in crypto. Once ADL is triggered, it's all over. Hedging is gone, and spot assets are dumped into your hands. Whose fault is it? 4% returns? Might as well just lie back and earn from government bonds, haha. That bunch in the B-book really hit the jackpot. What about DeFi...

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StealthMoon

· 01-08 12:41

Market makers took a huge loss this time, 20 billion just disappeared Liquidity has dried up, retail investors are even worse off 4% returns... might as well just earn interest B-book is making a killing, this is the reality

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