Bitcoin's Sharp Price Drop Wipes Out 1.6 Million Accounts Due to Misunderstood Leverage

On October 10, 2025, Bitcoin's price plummeted from $122,000 to $105,000, a 14% drop. This sharp decline led to the force-closing of over $19 billion in leveraged positions and wiped out more than 1.6 million accounts.

The author argues that a 14% drop is not unusual for Bitcoin, which has spent more than 80% of its life in a drawdown of 20% or worse.

It's the traders' choice to use leverage that led to their downfall, not the price move itself. The exchange doesn't decide when to close out a position; it's up to the trader to choose their leverage and set their liquidation price.

The author emphasizes that leveraging is often misunderstood as a multiplier of returns rather than a measure of risk tolerance. They recommend calculating the actual distance between entry and maintenance margin, not just relying on the multiplier.