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

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.

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.

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:

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.