Crypto market structure: exchanges, perps and liquidations
Crypto markets look like stock markets on a screen, but their structure is very different: always open, fragmented across venues, and dominated by leveraged derivatives.
Where it trades
- Centralised exchanges (CEXs): Binance, Coinbase, OKX, Bybit and others. They hold customers' assets, run order books and offer derivatives. Convenient, but you rely on the exchange's solvency and honesty.
- Decentralised exchanges (DEXs): run by smart contracts (lesson 7.2). You keep custody, but face smart contract risk.
- ETFs and listed products: spot bitcoin and ether ETFs give traditional investors exposure through a normal brokerage account.
Always open
Crypto trades 24 hours a day, every day. Liquidity is thinnest at weekends and overnight, which is when some of the sharpest moves happen. There's no closing auction and no circuit breaker.
Perps dominate
Perpetual futures (lesson 2.4) trade far more volume than spot on most major exchanges. The key data traders watch:
- Funding rates: persistently high positive funding means crowded, leveraged longs.
- Open interest: rising open interest with rising price means new leverage entering the market.
- Basis: the premium of futures over spot, a read on speculative demand.
Liquidation cascades
Exchanges offer high leverage, and positions are liquidated automatically when margin runs out. A sharp drop triggers long liquidations, which are market sell orders, which push price lower, which triggers more liquidations. On 10 October 2025, a sudden sell-off triggered by US tariff news set off the largest liquidation event on record, with around $19bn of leveraged positions closed in a day. Liquidation levels cluster, and traders watch where they sit much like options traders watch gamma.
Risks unique to crypto
- Counterparty risk: FTX's collapse in 2022 showed customer funds on an exchange can disappear.
- Manipulation: thinner markets and lighter regulation make wash trading and spoofing more common.
- Regulation: rules differ by country. In the UK, the FCA has banned the sale of crypto derivatives to retail consumers since 2021.
Key takeaway
Crypto prices are driven heavily by leverage and positioning. Funding, open interest and liquidation levels often explain the move better than any news headline.
Educational content only, not financial advice. Investing involves risk and you can lose money.