Bitcoin-Backed Loans Turned a Crash into a Controlled Exit

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 largest liquidation events in the history of cryptocurrencies, wiping out more than $19 billion in leveraged positions on all stock markets. Some traders watched in disbelief as BTC briefly fell below $100,000 before recovering hours later.

While many only saw chaos, the event revealed something deeper about how BTC-backed loans can function as a financing tool and an integrated form of risk management.

The financial dilemma: sell or borrow?

Imagine you run a company that has a treasury of BTC worth $1 million, accumulated at the beginning of the year as part of your broader balance sheet strategy. He bought Bitcoin in April 2025 at about $80,000 per coin, seeing it as a store of value and a diversification of cash reserves. You’re optimistic for the long term, but you still need liquidity to cover monthly operating costs: payroll, marketing, product development, etc.

Now we are faced with a classic question: how to finance operations more efficiently? You have two options:

Option 1: sell part of your BTC each month

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

This approach gives you short-term financing but requires 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 at which BTC would automatically be sold to repay the loan) gradually increases.

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

What happened during the accident?

One trader used this exact structure. At the beginning of October, its BTC-backed loan had a liquidation level of around $115,000. When the flash crash occurred on October 10, the automated settlement system was activated near that level.

At first glance, the settlement sounds negative. But in this case, it actually secured profits: the BTC had been purchased months earlier for $80,000. The push sale at $115,000 closed the position with a strong profit before the broader market crash.

The system worked exactly as planned. 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 settlement was based on prices from the Chainlink oracle, which aggregates data from several major exchanges to produce a reliable market average. During the decline, some exchanges, especially those with thinner order books, briefly showed BTC below $100,000.

But Chainlink’s feed remained closer to $104,000-$105,000, reflecting a fairer market level. This difference matters. By using decentralized oracle data, the system avoided unnecessary liquidations that could have been caused by temporary price manipulation of an exchange.

It is a key example of how automated lending and trusted data sources can reduce risk, even in rapidly evolving markets.

Lessons from the sudden October crisis

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

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

• Liquidations don’t always mean losses; sometimes they mean automatically locked profits.
• 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 simply another market shock. It was a real-world stress test of how the right financial infrastructure can improve risk management.