Has ADL Ever Caused a Significant Market Event?

While ADL is designed to contain risk, its activation during periods of extreme volatility can exacerbate market fear. There have been instances where large, cascading liquidations led to a rapidly depleting insurance fund, triggering ADL on a large scale.

The resulting forced closure of many profitable positions can contribute to further price instability and a temporary loss of confidence, though it is the result of the event, not typically the cause.