Stock Market Closure Leads to Liquidation in Tokenized Market

During the weekend when the stock market was closed, a large-scale forced liquidation occurred in the digital asset derivatives market tracking semiconductor stock prices. Trading continued, but the channels for adjusting price differences by buying and selling spot stocks were limited. This revealed the gap between the convenience of being able to trade at any time and the liquidity that can actually accommodate real assets.

This issue needs to be examined in the context of 'liquidity fragmentation,' which the International Monetary Fund (IMF) has pointed out as a challenge for the tokenization market. Even if the number of exchanges increases, if orders and funds are scattered across multiple markets, it becomes difficult to absorb sudden price fluctuations. The ability to trade on weekends and the ability to trade without significant price losses during that time are two different issues. This is also why market liquidity cannot be judged solely by trading hours.

According to CoinGlass data on Saturday, the 17th, from 9:22 PM to 9:32 PM (UTC), positions worth $51.6 million (approximately 69.144 billion KRW) were forcibly liquidated in the perpetual futures linked to semiconductor stocks and funds. The liquidation amount for long positions betting on price increases was $38 million (approximately 50.92 billion KRW), accounting for about 74% of the total. By product, $12.7 million (approximately 17.018 billion KRW) was liquidated in contracts linked to the semiconductor leveraged ETF SOXL, and $10 million (approximately 1.34 billion KRW) was liquidated in contracts linked to SanDisk and SK Hynix, respectively.

Selling First on Binance

David Jung, CEO of Tread.fi, explained that an analysis of trading records showed that selling appeared first on Binance. Large sell-offs related to SanDisk and Micron began at 9:21:59 PM, and orders came from Hyperliquid before a second had passed. It is analyzed that about ten addresses bet on price declines in six semiconductor-linked contracts within 1.8 seconds.

A noteworthy point in this case is that the trading hours of the spot market and the derivatives market were different. When the stock market is open, market makers can buy and sell both stocks and derivatives together to reduce risk. Arbitrage that takes advantage of price differences between the two markets also helps narrow the price gap. However, on weekends, since spot stocks cannot be traded immediately, even if the derivatives prices deviate significantly from the spot prices, it is difficult to conduct opposing trades in both markets simultaneously. Market makers may also find it challenging to narrow quotes or accept large orders due to the difficulty in offsetting risks with stock trades.

Leverage can amplify price fluctuations in such situations. If an investor holds a position larger than the margin, they may face forced liquidation when prices fluctuate sharply. When long positions are liquidated, sell orders emerge, and those sell orders can further lower prices, leading to the liquidation of other positions in succession. Especially in shallow markets for buy orders, even the same volume of sell orders can move prices significantly. Therefore, it is essential to examine not only the liquidation amount but also how thick the quotes were at that time and how liquidation orders affected prices.

Accessibility and Liquidity Are Separate

The IMF's Global Financial Stability Report (GFSR) for October 2026 pointed out that trading accessibility and liquidity should be distinguished in tokenized stocks. According to the report, the market size for tokenized stocks is $2.3 billion (approximately 3.82 trillion KRW). Among these, the platforms On-Chain Finance and Backed Finance account for over 70% of the total value.

However, just because the issuance volume is concentrated on some platforms does not mean that actual buy and sell orders are also concentrated in one place. The issuance amount only shows the market's exterior and does not reflect the quotes or trading volumes that investors encounter when trading.

When the IMF compared five highly liquid U.S. tokenized stocks with their underlying stocks and analyzed data from 11 trading venues, including centralized and decentralized exchanges, it found that the realized volatility of tokenized stocks was about 1.5 times higher than that of the underlying stocks. In contrast, liquidity was lower on centralized exchanges than in traditional markets and even lower on decentralized exchanges. The IMF explained that "due to shallow quotes and limited market-making activities, prices can move more significantly compared to trading volumes."

This phenomenon can be explained by the so-called 'liquidity fragmentation.' Even if products linked to the same company are involved, problems arise when orders and funds are divided across multiple platforms or blockchains. If there are many buyers in one market and many sellers in another, but assets and funds cannot be quickly moved, price differences will inevitably persist. Even if the overall market grows, individual markets that investors use may lack the capacity to accommodate assets. The IMF also pointed out that "when liquidity is divided across multiple networks and trading venues, trading becomes difficult, and price formation can become unstable."

Ownership Must Be Guaranteed After Transfer

To solve these problems, it is not enough to technically connect blockchains. Ownership and redemption rights must be maintained even after assets are moved to another platform, and the payment assets used in transactions must also be transferred in a safe and reliable manner. Piero Cipollone, Executive Board Member of the European Central Bank (ECB), emphasized in a speech on August 26 that merely connecting ledgers technically is not sufficient. The rights to assets must remain valid after moving platforms, and the legal and operational effectiveness of the transfer process must also be guaranteed.

Of course, the 'trading time difference' and 'liquidity fragmentation' cited as causes of this perpetual futures crash are different issues. The former refers to the difficulty of offsetting risks due to the different operating hours of the spot and derivatives markets, while the latter refers to the problems arising from orders and funds being divided across multiple platforms.

However, both cases show a common challenge. To extend trading hours, risk management tools must also be operational, and assets and funds must be able to move between markets. This is because shocks can spread quickly, while orders and funds that can accommodate assets may not move in time. Therefore, when assessing the competitiveness of a market, it is essential to check not only the number of listed items or issuance amounts but also the actual trading conditions. It is important to see how much large orders move prices, whether buy and sell quotes are maintained over the weekend, and whether trades can be made to narrow price differences when they arise. For derivatives, it is also necessary to examine how the reference price is determined and how margins and forced liquidations are conducted.

Clear Limitations of the Early Market

Ultimately, while tokenization has the advantage of increasing the time investors can access the market and enabling small transactions, liquidity is not guaranteed simply by the fact that trading can occur on weekends. For the market to grow, there must be funds available to accommodate orders when investors want to sell, and assets and funds must be able to move smoothly between markets.

The IMF assesses that the early tokenization market is still small and fragmented, with low liquidity and high volatility.

Gonzalo Fernandez Dionis, Senior Financial Sector Expert at the IMF's Monetary and Capital Markets Department, emphasized at the GFSR presentation event held at the Bank of Korea on the 8th, "Market fragmentation can divide liquidity into multiple islands, preventing capital from moving to where it is needed or where it is valued more highly." To realize the benefits of tokenization, it is crucial to establish safe conditions under which assets and funds can move across markets.