Major cryptocurrency exchanges are not generally liquidating Bitcoin to cover their own losses, but large-scale liquidations of Bitcoin positions do occur frequently due to market volatility and leveraged trading. These liquidations are mostly the result of forced selling triggered by traders’ margin calls and auto-deleveraging mechanisms rather than exchanges selling their own Bitcoin holdings to cover losses.
In October 2025, the crypto market experienced one of the largest liquidation events in history, with over $19 billion worth of crypto positions liquidated in a single day. This was largely driven by a sudden market shock following geopolitical tensions and tariff announcements, which caused liquidity to evaporate and forced many leveraged traders to liquidate their positions. The cascading effect of forced liquidations and panic selling led to a sharp price crash in Bitcoin and other cryptocurrencies[1].
Exchanges like Binance, which handle a significant portion of global crypto trading volume, faced severe stress during this period. Binance’s trading engine was overwhelmed by a massive $90 million market sell order that caused internal price feeds to collapse, leading to a self-reinforcing price drop. This event caused temporary trading halts and order rejections, preventing traders from executing trades and exacerbating the volatility. However, this was a technical and liquidity crisis rather than an indication that Binance or other exchanges were selling Bitcoin from their own reserves to cover losses[2].
Liquidations in the crypto market typically occur when traders use leverage—borrowing funds to increase their exposure to Bitcoin price movements. If the market moves against their positions, exchanges automatically liquidate these positions to prevent further losses that could affect the exchange’s financial stability. This process is a risk management mechanism rather than a sign of exchanges themselves incurring losses that require selling Bitcoin[1][4].
Data from platforms tracking liquidations, such as Coinglass, show that large liquidation events are common during periods of high volatility. These liquidations reflect traders’ forced exits rather than exchanges offloading Bitcoin. For example, in recent events, billions of dollars in long positions were liquidated across major exchanges, but this was due to margin calls on traders, not exchanges selling Bitcoin to cover their own losses[3][4].
In summary, while major exchanges experience technical and liquidity challenges during extreme market events, the large-scale Bitcoin liquidations observed are primarily the result of leveraged traders being forced out of their positions. Exchanges use automated systems to manage risk and maintain market stability, but they do not typically liquidate Bitcoin from their own holdings to cover losses. Instead, these liquidations are a reflection of market dynamics and trader behavior under stress.