James Richardson
The Ethereum lending sector recorded its biggest liquidation event in the past 12 months, with nearly $500 million in collateral being liquidated in February. This marks the second-largest monthly liquidation in DeFi history, surpassed only by the May 2021 crash, which saw $670 million in liquidations.
The surge in liquidations coincided with a sharp decline in the overall crypto market, causing a significant drop in total market capitalization and triggering a cascade of forced position closures across lending protocols.
The two largest lending platforms, Aave and Compound, processed the bulk of these liquidations. Their liquidation mechanisms allow third-party liquidators to repay portions of at-risk loans and claim the borrower’s collateral at a discountโtypically between 5% and 15%, depending on the asset. This system ensures that market inefficiencies are quickly corrected.
An analysis of Aave’s collateral composition reveals that the most impacted assets included:
- Ether (ETH) โ 2.06 million ETH ($5.09 billion)
- USDT โ 3.56 billion USDT
- Wrapped Tokens โ wstETH, WBTC, weETH
- USDC โ 3 billion USDC
The sharp decline in market prices led to many positions breaching their liquidation thresholds, resulting in large-scale liquidations.
Despite the high liquidation volume, major DeFi lending platforms have continued to operate smoothly, demonstrating the robustness of automated liquidation mechanisms. Februaryโs events serve as a reminder for borrowers to maintain strong collateralization ratios to withstand sudden market fluctuations.
Notably, liquidation data in public reports may underestimate actual figures due to API limitations and incomplete reporting, meaning that the true extent of market-wide liquidations could be significantly higher.
Bybit Records Highest Liquidation Event in Exchange History
As Bitcoin (BTC) and Ethereum (ETH) prices plummeted by over 18% and 26%, respectively, Bybit recorded an all-time high in long liquidations, totaling $1.4 billion within a single week. The highest single-day liquidation occurred on February 25, 2025, with $383 million in long positions being liquidatedโmarking the exchangeโs largest-ever single-day and weekly liquidation events.
Unlike most centralized exchanges (CEXs), Bybit has recently committed to fully disclosing its liquidation data. In contrast, liquidation figures on platforms like Binance, OKX, and Huobi tend to be underreported due to API rate limits, meaning real liquidation figures could be up to four times higher than what is publicly displayed.
This transparency from Bybit explains why its liquidation numbers appear significantly higher than those of its competitors during the same period.
Bitcoin and Ethereum Open Interest Sees Significant Decline
The market downturn also led to a sharp decline in open interest (OI) on BTC and ETH futures across Bybit and the Chicago Mercantile Exchange (CME):
- Bybit BTC Futures OI dropped by 35%, from $8.5 billion (Feb. 21) to $5.45 billion (March 1).
- CME BTC Futures OI declined by 23%, from $16.93 billion to $12.96 billion.
- Bybit ETH Futures OI fell by 41%, from $3.07 billion to $1.81 billion.
- CME ETH Futures OI declined by 30%, from $3.2 billion to $2.2 billion.
The significant drop in futures open interest signals widespread deleveraging, as traders reduce exposure amid heightened market uncertainty.
As the crypto market continues to navigate volatility, these events highlight the importance of risk management strategies and transparent reporting in maintaining a healthy trading ecosystem.
