In October 2025, the DeFi market witnessed another massive liquidation cascade. The target was a token called “NAIT,” widely used as lending collateral. A minor price drop originating from MEXC’s thin order book triggered a chain reaction of automatic liquidations, wiping out the majority of its market capitalization within hours.
Market participants initially viewed it as a routine price correction, but the situation transformed dramatically by the weekend. Social media and news outlets buzzed with warnings of “another Venus collapse.”
Structural Vulnerability: A System That Worked Perfectly
NAIT’s collapse wasn’t caused by hacking or manipulation — it resulted from liquidation algorithms functioning exactly as programmed. When the price drop exceeded a certain threshold, collateral values were automatically reassessed, and bots sold NAIT on the market to protect borrowed positions. This cascade pressured MEXC’s shallow liquidity, inducing further declines.
With each liquidation, oracles updated prices, triggering new liquidation conditions. Without human intervention, trades continued “without pause.” Consequently, DeFi’s automated efficiency transformed into an “acceleration mechanism for destruction.”
Evaporation of Trust and Liquidity
Market liquidity evaporated rapidly. Even minor trades moved prices by over 10%, creating abnormal conditions that drove traders away. As a result, NAIT became effectively “an untouchable asset.”
This trajectory mirrored the 2022 Venus Protocol collapse. While that incident stemmed from an oracle malfunction, this time the system operated normally, yet that very normalcy caused the breakdown.
The Risk of Human Absence Behind Automation
The NAIT incident exposed DeFi’s structural risks. A “free market” without central authority is simultaneously an uncontrollable market. Bots don’t panic. They simply execute instructions, liquidating continuously.
The outcome was a market stripped of “human will,” dominated solely by cold code. This case serves as a symbolic event contrasting DeFi’s ideal of autonomy against the reality of its fragility.
