Essential Guide: Crypto Market Crash Last October Marked End Of ‘easy Yield’ Era:...
BitMEX says the era of easy money via arbitrage trades likely died in the October crash, as a liquidation spiral left many market makers naked.
The massive crypto crash in October decimated market makers, ending an era where crypto traders were able to make easy money, says crypto exchange BitMEX.
The crash between Oct. 10 and 11 wiped out $20 billion in the “most destructive event for sophisticated market makers in crypto history,” BitMEX said in its State of Crypto Perpetual Swaps in 2025 report released on Thursday.
A feedback loop of auto-deleveraging, where exchanges liquidate profitable, leveraged positions to cover themselves and prevent further losses, broke the market makers’ “‘safe’ delta-neutral strategies,” forcing them to pull liquidity and leave orderbooks at multi-year lows, BitMEX said.
“For years, perpetual swaps have been a great source of alpha for yield: farm the funding, capture the spread, and trust the exchange engine to maintain the walls,” it added. “That era of easy yield and structural stability appeared to end in 2025.”
Market makers are critical to ensuring there are always counterparties for trades. They usually hold crypto and bet against, or short, the token to minimize risk.
When auto-deleveraging mechanisms during the October crash forcibly closed the market makers’ short hedges, they were left holding “naked spot bags in a free-falling market.”
“This breach of the ‘neutrality’ promise caused MMs [market makers] to pull liquidity globally in Q4, resulting in the thinnest orderbooks seen since 2022,” BitMEX said.
BitMEX said that the strategy, where traders could arbitrage between the spot and futures markets, “has become overcrowded” with funding rates dropping to 4%, “killing the funding rate trade” and underperforming Treasury bills.
Meanwhile, BitMEX added that last year also saw the market split into “fair matchers” and “predatory B-Book exchanges,” where the platform operates as a market maker and has “‘abnormal trading’ clauses to void profitable trades.”
Source: CoinTelegraph
