Ceo Stephan Lutz On Bitmex Resilience During The October Crypto Crash

What Happened

“Many exchanges accept a diverse range of altcoins as collateral for derivatives trading, which creates the perfect scenario for retail investors to hit such a crash. High haircuts on collateral mean early liquidation. Altcoins have less liquidity, especially during such a scenario, which leads to congestion of the systems.”

Market Context

When crypto markets plunged on Oct. 10–11, 2025, the sell-off triggered one of the sharpest and fastest liquidations ever recorded in digital asset trading. CoinGlass data recorded more than $19.16 billion in positions wiped out within 24 hours, with over 1.6 million traders affected across major exchanges.

While several large crypto exchanges saw multi-billion dollar liquidations, BitMEX stood out. The exchange recorded about $32 million in long liquidations and $5.9 million in short positions. That was less than 0.2% of the market’s wipeout. Its trading engine held steady under record load, processing its highest trading volume since 2021 while maintaining full access for users throughout the crash.

BitMEX’s resilience during the October crash resulted from deliberate engineering for stress conditions, where stability matters more than scale. Lutz explained that BitMEX’s trading engine was specifically designed to remain functional during sudden market shocks. He noted that the company had avoided several common design flaws seen elsewhere, particularly in how collateral is managed through “aggressive Multi-Asset Margining.”

“BitMEX only accepts collateral with relatively low haircuts, around 5% only, and which has proven liquid in such a scenario. This reduces trading opportunities, but ensures that in such a scenario, the system works smoother and your liquidation as a trader comes later.”

Lutz added that collateral on BitMEX must be held directly on the platform, not in external accounts or wrapped instruments, ensuring it is immediately available to meet margin calls. This structural decision keeps market makers responsive and reduces the kind of panic-driven feedback loops that have destabilized other venues.

The same rigor applies to BitMEX’s Insurance Fund. During the crash, the fund absorbed about $2 million in losses while maintaining full solvency. As the company noted in its report, the fund “is never staked, lent, or rehypothecated.” Lutz described it as a rules-based mechanism that functions automatically, removing human discretion and protecting user funds even during periods of market stress.

“If the insurance fund is just a committed number but is not automated or used for generating yield or supporting trading, you will need to get everyone online first before it operates,” he told BeInCrypto.

Lutz acknowledged that such discipline comes with trade-offs. The approach may cap short-term activity.

“In a low volatility environment, it limits trading volume creation. But in such volatile environments, our design is beneficial for our traders and ensures their protection.”

How BitMEX’s Design Contained the Market Crash

Price feeds became the Achilles’ heel of the October crash. When internal oracles malfunctioned, several exchanges faced liquidation cascades based on distorted data. BitMEX avoided that outcome through its Fair Price Marking model.

“BitMEX does not use its own last-traded price for liquidations. It uses a composite index for Fair Price Marking, derived from a weighted average across 16 major liquid spot exchanges – all our competitors included. This methodology prevents localized liquidity crises or flash crashes on a single constituent exchange from triggering unjust liquidations,” Lutz elaborated.

Lutz emphasized that this structure also makes manipulation significantly harder. Because BitMEX draws prices from multiple sources, no single actor can distort its markets through thin order books or local anomalies.

“The ADL was invoked for low liquidity contracts and for strange trading behavior only. We monitor trading volumes and behavior and aim to protect legitimate positions, mostly which have been entered and added to open interest before such a sudden event.”

“We experienced some mark and index prices being temporarily ‘stuck’ — an intentional safety feature that caps maximum price moves to catch data errors or anomalous wicks. Our team was only present to verify these moves and prevent any automated chaos that would be caused by flawed oracles from other exchanges.”

Why It Matters

While many exchanges saw their insurance funds drained or halted withdrawals, BitMEX’s risk engine intervened only 15 times, a fraction of its total open contracts. Lutz said ADL activation was “deliberate and surgical,” designed to protect the fund from collapse.

Details

BeInCrypto recently sat down with Stephan Lutz, BitMEX CEO, to discuss what allowed the exchange to stay stable when others faltered, how its design philosophy prioritizes resilience under pressure, and what lessons traders should take from the October crypto crash.

Stability by Design

Lutz explained:

In its official report, the company described this setup as “immunity from localized de-pegging,” which effectively insulated users from the pricing chaos that swept through competitors.

Another layer of protection came from the Auto-Deleveraging (ADL) mechanism, which the company calls its “ultimate safeguard.”

According to BitMEX’s post-event data, this rules-based approach kept its Insurance Fund fully operational and reduced unnecessary losses for users already under stress.

Even with these automated systems, human verification remained an essential component. Lutz noted that during the most volatile period, the team stepped in only to validate data integrity.