Bitcoin-backed loans turned a crash into a controlled exit | Opinion

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On October 10, 2025, Bitcoin (BTC) fell sharply, from around $122,000 to $102,000 in less than an hour. It was one of the biggest liquidation events in crypto history, wiping out more than $19 billion in leveraged positions across exchanges. Some traders watched in disbelief as BTC briefly dipped below $100K before recovering hours later.

Summary

• On October 10, 2025, Bitcoin dropped from ~$122K to ~$102K in under an hour, wiping out $19B+ in leveraged positions, with a brief dip below $100K before recovering.
• Companies and traders using BTC as collateral for loans maintained liquidity without selling, with automated liquidation systems locking in profits during the crash.
• Importance of decentralized data: Chainlink oracle pricing prevented unnecessary liquidations by providing a fair market reference, showing how reliable data feeds enhance risk management in volatile markets.

While many saw only chaos, the event revealed something deeper about how BTC-backed lending can work as both a financing tool and a built-in form of risk management.

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The financing dilemma: Sell or borrow?

Imagine you’re running a company that holds a BTC treasury worth $1 million, built up earlier in the year as part of your broader balance-sheet strategy. You bought Bitcoin in April 2025 at about $80,000 per coin, seeing it as both a store of value and a diversification of cash reserves. You’re bullish long-term, but you still need liquidity to cover monthly operational costs — payroll, marketing, product development, and so on.

You now face a classic question: how to fund operations most efficiently? You have two options:

Option 1 – Sell part of your BTC each month

That provides cash but reduces your BTC exposure and future upside. Suppose you sell your BTC each month at the following prices:

Month BTC price ($) May 95,000 June 104,000 July 107,000 August 108,000 September 114,000

This approach gives you short-term funding but forces you to part with appreciating assets.

Option 2 – Borrow against your BTC treasury

Instead of selling, you use your BTC as collateral and borrow Tether (USDT) or fiat through lending platforms. Each month, you increase your loan slightly, and your liquidation price — the level where BTC would automatically be sold to repay the loan — gradually rises.

That price effectively acts as a stop-loss: if BTC falls below it, the collateral is liquidated automatically. This structure lets you stay invested while using your BTC holdings as working capital — turning long-term conviction into short-term liquidity.

What happened during the crash

One trader used this exact structure. By early October, their BTC-backed loan had a liquidation level of around $115,000. When the October 10 flash crash hit, the automated liquidation system triggered near that level.

At first glance, liquidation sounds negative. But in this case, it actually locked in profits — the BTC had been purchased months earlier at $80K. Selling automatically at $115K closed the position with a strong gain before the broader market collapse.

The system worked exactly as intended. It protected capital, preserved liquidity, and turned what could have been a margin call into a disciplined exit.

The role of oracles: Chainlink data matters

The liquidation relied on Chainlink oracle pricing, which aggregates data from several major exchanges to produce a reliable market average. During the crash, some exchanges — especially those with thinner order books — briefly showed BTC below $100K.

But the Chainlink feed stayed closer to $104–105K, reflecting a fairer market level. This difference matters. By using decentralized oracle data, the system avoided unnecessary liquidations that could have been triggered by one exchange’s temporary mispricing.

It’s a key example of how automated lending and reliable data feeds can reduce risk, even in fast-moving markets.

Lessons from the October flash crash

The October 10 event reminded everyone that crypto leverage is powerful — and dangerous.

But it also showed that properly structured asset-backed lending can turn volatility into an ally:

• Liquidations don’t always mean losses — sometimes they mean profits locked in automatically.
• Automated execution can outperform manual reactions in fast markets.
• Well-managed BTC treasuries can access liquidity safely, even in extreme conditions.

The October 2025 crash was not just another market shock. It was a real-world stress test of how correct financial infrastructure can improve risk management.

Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.

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