Author: Scof, who was liquidated, ChainCatcher
Editor: TB, ChainCatcher
The market has not yet recovered from the aftermath of the Bybit and infini hacking incidents, and it has now been hit again in the early hours of this morning: according to data from Coinglass, in the past 24 hours, a total of 373,863 people have been liquidated globally, with a total liquidation amount of $1.405 billion. The exchange with the largest liquidation volume is Bybit, which is also a platform commonly used by institutions.
In addition, data from digital asset management firm Arca shows that the value of most tokens has fallen by 30% to 80% since mid-December last year, with Solana's market capitalization losing about $50 billion in the past month.
This article summarizes the 4 reasons that led to the market crash.
Months of Decline After Major Hacking Incidents
Looking at past market trends, major hacking incidents generally occur at the bottom of the market, and even lower levels may appear.
For example, in March 2022, Ronin was hacked for $625 million, and Bitcoin subsequently had negative monthly candles in April, May, and June, with the Bitcoin price falling from $45,510 to $19,942;
In March 2023, Euler Finance was hacked for $197 million, and Bitcoin ended its upward trend of the previous few months and entered a six-month consolidation period;
In July 2024, the Indian exchange WazirX lost $235 million, and the market, which had been fluctuating in a range for five months, closed negative in the following August, with the price even dropping from a high of $64,628 to a low of $49,000.
The Bybit incident this time is the largest theft case in history. Although the most dangerous risk of a bank run has been resolved, the hackers still need to cash out the stolen ETH or convert it into other cryptocurrencies, which will put a lot of selling pressure on the market. This process will also drain a lot of Altcoin liquidity, making it unlikely that the Altcoin season will arrive in the short term.
MSTR Turns to Convertible Bond Financing, Slowing the Pace of BTC Purchases
On February 20, Strategy (formerly MicroStrategy) announced the pricing of a $2 billion convertible preferred stock offering, and on February 24 disclosed that it had purchased an additional 20,356 Bits of Bitcoin at an average price of $97,514.
Previously, MSTR mainly used stock ATM (i.e., selling stocks directly in the market) financing to quickly increase its Bitcoin holdings, purchasing $16 billion worth of Bitcoin in just a few months.
However, MSTR has recently changed its strategy, turning to convertible bond (CB) financing to reduce financing costs, but this has reduced its execution efficiency, meaning it will no longer purchase Bitcoin at such a rapid pace. This change has led to a short-term withdrawal of market liquidity, with the liquidity premium being quickly squeezed out, which may disappear, leading to downward pressure on the Bitcoin market.
In addition, CB holders may convert the bonds into stocks in the future, leading to dilution of MicroStrategy's equity. Investors are concerned about the company's long-term purchasing power, which could weaken the bullish outlook on Bitcoin.
Long-Awaited Positive News and Successive Negative Policy Announcements
Positive policies from the government are often slow and sustained. Since Trump announced the Bitcoin national strategic reserve plan, the actual actions have been delayed, and he himself has been absent from the crypto market for a while, eroding the market's patience.
BitMEX co-founder Arthur Hayes has stated that the core problem with government hoarding of assets is that they often trade for political rather than financial interests, leading to policy instability. The market's disappointment with the Bitcoin strategic reserve has further undermined investor confidence.
In addition to the long-awaited positive news, the new tariff policy announced by the Trump administration is undoubtedly pouring oil on the fire for the market. According to the latest proposal, Chinese ship operators may have to pay a fixed fee of $1 million per port call in the US, or $1,000 per net ton of the ship. Analysis shows that this policy will directly lead to a surge in US shipping costs, indirectly fueling continued or high inflation, further dampening the expectation of rate cuts.
On February 25, according to Cointelegraph, at the legislative session on February 24, the South Dakota House of Representatives Business and Energy Committee decided to postpone the HB 1202 bill to the "41st day" of the current legislative session. However, the state legislature has a maximum of only 40 days, effectively killing the relevant bill and further dampening market sentiment.
In addition, some major market makers during the consensus conference stated that TRUMP and LIBRA Memecoins are absorbing the liquidity of more mature cryptocurrencies, and the frenzy of Memecoins is a key reason for the sluggishness of Bitcoin and the entire Altcoin market, a feeling similar to the depressed price trend seven years ago.
Has the Bear Market Arrived?
Recently, the news of Microsoft removing two data centers has raised market concerns about the risk of oversupply of AI infrastructure, and Trump's announcement that he will continue to impose tariffs on Canada and Mexico have also undermined market confidence. According to 4E monitoring data, the major US stock indexes generally performed weakly, with the Dow Jones Industrial Average barely closing up 0.08%, the S&P 500 index falling 0.50%, and the Nasdaq index closing down 1.21% due to the collective decline of tech stocks.
In addition, Steve Cohen, the billionaire founder of the hedge fund Point72, said in a speech in Miami that the Trump administration's policies could lead to a significant correction in the US stock market. Cohen expects the US economic growth rate to slow from 2.5% to 1.5% in the second half of 2025, which is the first time he has felt "extremely negative" in a while. He pointed out that Trump's tariff policy is essentially a tax, which may trigger international trade retaliation, and immigration restrictions will also have a negative impact on labor force growth, while the anti-corruption initiatives implemented by the government (DOGE) are actually a tightening policy, and the accumulation of these factors will have a severe impact on the US economy.
Against the backdrop of the S&P 500 index having accumulated more than 50% since the beginning of 2023 and Nvidia's stock price soaring 800%, the current market valuation is at a historical high. The holdings of hedge funds, retail investors and others are already approaching the limit, and the downside risk of the market has increased significantly.
Arca's Chief Investment Officer Jeff Dorman said, "The crypto market has been sluggish for eight weeks, and stocks, fixed income, and gold have not been affected by any of the indicators used to explain the sluggishness, only cryptocurrencies have continued to decline. This is largely due to low market sentiment, losses from various Memecoins, and a lack of capital support for new token issuance."
Analyst Godbole believes that the bearish candle on Monday signals more losses to come, and futures activity suggests a large influx of new shorts. The cumulative trading volume (CVD) of Binance's futures and spot markets has already turned negative and is further expanding with the price decline, indicating that selling pressure has exceeded buying activity.
Binance's BTC/USDT futures price, OI, and CVD. (Coinglass)
Investor Chris Burniske, however, stated that 2021 also experienced a 56% drop in BTC, a 61% drop in ETH, and a 67% drop in SOL, with many other Altcoins falling 70-80%. Therefore, he believes we are still in the mid-bull market, and those who think the market has entered a full-blown bear market are actually misled.
But overall, the market has entered a state of extreme panic, and the prospect of a large-scale Altcoin rally is now unlikely. It is urgent for actual positive policy implementation or interest rate cuts to be achieved in order to support a short-term rebound.
