February’s crypto downturn triggered massive forced liquidations across DeFi lending platforms, marking the worst event since May 2021.
DeFi markets suffered their second-largest liquidation event in history last February, with $500 million in collateral erased as crypto prices tumbled.
According to The Block, the sell-off occurred primarily on major lending platforms like Aave and Compound, as plunging crypto prices triggered automated liquidations, wiping out borrowers’ collateral.
The sharpest liquidations happened as Ethereum’s price plunged, impacting assets commonly used as loan collateral, such as ETH, wstETH (wrapped staked ETH), and WBTC (wrapped Bitcoin).
As borrowers failed to top up their collateral, liquidators stepped in to buy the assets at a discount, further accelerating the sell-off.
Bybit’s massive liquidations reveal a crypto market discrepancy
Centralized exchange Bybit also reported a record-breaking hack, leading to long liquidations totaling $1.4 billion during the same week, the largest in its history. On February 25 alone, over $383 million in long positions were wiped out.
Bybit’s liquidation figures were significantly higher than those reported by other major exchanges like Binance and OKX, according to CoinGlass data shown by The Block.
However, Bybit is currently one of the few exchanges that fully discloses real liquidation data, whereas others often report incomplete figures due to API limitations.
This means that the actual liquidation numbers across all exchanges could be even larger than what’s publicly available.
What’s next for crypto investors?
The recent liquidation wave exposed the fragility of leveraged positions, and macro uncertainties could prolong market volatility.
Bitcoin’s drop below $90,000 again, persistent inflation concerns, and Federal Reserve policy shifts may keep pressure on risk assets.
If another downturn occurs, a fresh wave of liquidations could hit overleveraged traders, further destabilizing the market.
However, institutional adoption is gaining momentum, offering a potential catalyst for recovery.
President Trump’s proposed U.S. strategic crypto reserve could drive long-term confidence, while analysts still predict a parabolic Bitcoin run to $150K in 2025.
If these initiatives materialize, crypto markets could see renewed liquidity and stability, reducing the likelihood of another mass liquidation event.
