Crypto Exchanges' Copycat Auto-Deleveraging Strategies Punish Winning Traders

Crypto exchanges are increasingly copying each other's strategies to manage auto-deleveraging, which can punish winning traders.

Margie Feng, marketing lead at Solayer, notes that many onchain perpetual futures venues offer similar products, and the competition has shifted from features like leverage to how exchanges treat winners and losers when it comes to auto-deleveraging.

Feng describes a system called the Queue, used by Binance, Hyperliquid, and Lighter, which ranks traders by profit and leverage and closes positions on the winning side until the shortfall is covered.

A paper by Tarun Chitra argues that this approach can lead to excessive losses for winning traders, with Chitra estimating between $45 million and $51.7 million in lost profits during a single event last year.