Shaw, Jinse Finance
Around 1:00 PM Beijing time today, the cryptocurrency market experienced sudden and significant volatility, with a rapid and temporary decline. Bitcoin briefly dropped over 2%, briefly falling below $111,300; Ethereum fell 5%, briefly falling below $4,100. Other cryptocurrencies were also affected, with Solana dropping 7% within three minutes and Dogecoin falling nearly 11%.
Data shows that within an hour, the total amount of liquidated positions across the entire network reached $1.026 billion, of which approximately $1.007 billion was for long positions and $19.3699 million was for short positions. Furthermore, according to Coingecko data, the total cryptocurrency market capitalization fell below $4 trillion, currently at $3.992 trillion, a 24-hour decline of 4.0%. BTC holds a 56.4% market share, while ETH holds a 12.5% share.
Institutional assessments of cryptocurrency trends show that Bitcoin faced heavy selling pressure starting at 13:59. Although Bitcoin briefly fell to 111,300, the price subsequently rebounded as bargain-hunting buyers re-entered the market.
Let’s briefly analyze what caused this unexpected market flash crash.
1. Rumors of Bybit user assets being stolen may trigger panic
Today, a shocking rumor surfaced on social media, with Ticker Wire claiming that the crypto exchage Bybit had been hacked, with $1.5 billion in ETH stolen. The hackers then proceeded to sell off the stolen assets in large quantities to increase market supply. This rumor triggered a sharp drop in the cryptocurrency market.
Bybit subsequently issued an official statement addressing online rumors of a security breach and user asset theft, stating that these rumors are completely false, user funds are safe, and platform trading and operations are operating normally. Bybit's Chinese head, Tina, also issued a statement debunking the rumors, stating that they originated from a false post on a social media account with only 59 followers. Community members are urged not to spread this false information to avoid causing unnecessary panic.
The authenticity of the Bybit rumors is no longer important. What is important is that it has caused panic in the market , and investors' panic selling has also stimulated short-term large fluctuations in the market.
2. The surge in Altcoin, represented by perpetual contract DEXs like Aster, has prompted a cooling of the market.
Decentralized perpetual swap exchanges (DEXs), represented by DEX derivatives platforms like Hyperliquid and Binance-backed Aster, have recently become a focus of market attention . Hyperliquid's market share has rapidly increased, reaching 6.9% in August and boasting $21.4 billion in trading volume for the month, maintaining its top growth rate. Within hours of its launch, the price of Aster's native token, ASTER, soared 400% from its IPO price. Aster has processed over $514 billion in trading volume for 2 million users. Following the token launch, the platform's total value locked (TVL) briefly exceeded $2 billion , but has since fallen back to $655 million. Coingecko data shows that Aster's stock price reached a high of $1.94 yesterday, reaching a fully diluted valuation (FDV) of $15.52 billion .
As DEX platforms specializing in derivatives trading, Hyperliquid and Aster both support perpetual contract trading with high leverage. Hyperliquid's leverage is capped at 40x, while Aster's leverage reaches up to 100x for most trading pairs, with leverage reaching as high as 1001x for certain assets. The yield-earning nature of both platforms has also attracted significant liquidity.
Last weekend, market sentiment for Fomo intensified, with investors chasing Perp DEX , which spurred a surge in Perp DEX-related Altcoin. MYX closed at $9.77, up 3.6% on the day of 24; RAGE at $0.2965, up 12.3% on the day of 24; DERI at $0.0063, up 9.4% on the day of 24; and AVNT at $2.03, up 0.1% on the day of 24.
Popular DEX platforms like Hyperliquid and Aster have driven rising returns for many investors, spurring a surge in investors to participate in leveraged contract trading. However, higher leverage ratios can lead to greater asset volatility, increasing investors' risk of forced liquidation .
3. Arthur Hayes's sell-off of Hype tokens may exacerbate market panic
On Sunday evening, BitMEX founder Arthur Hayes sold 96,628 HYPE tokens (worth $5.1 million) he had purchased a month earlier . In his August 25th WebX Summit speech, he predicted a 126-fold increase in HYPE's value. Hayes today shared a research report from his family office, Maelstrom, explaining his decision to sell HYPE.
Starting November 29th, 237.8 million HYPE tokens will be unlocked linearly over 24 months. At $50 per token, the team will unlock $11.9 billion, resulting in a monthly inflow of nearly $500 million in nominal terms. Current buyback levels can only absorb approximately 17% of this total, representing a monthly oversupply of $410 million.
The upcoming huge unlocking volume of HYPE tokens may trigger market selling pressure, which may be the reason why Arthur Hayes chose to sell Hype tokens at this time .
4. The Fed’s interest rate cut has been implemented, and the expected positive impact may have been exhausted
Last Thursday, the Federal Reserve's latest FOMC resolution lowered the benchmark interest rate by 25 basis points to 4.00%-4.25%, resuming the pace of interest rate cuts that had been suspended since December last year.
Expectations of a Federal Reserve rate cut have long been building, and the market is eagerly anticipating the positive impact on major assets like stocks and cryptocurrencies. The Nasdaq and numerous tech stocks continue to hit new highs, and the cryptocurrency market is also at a cyclically high level. This week, Federal Reserve Chairman Powell is scheduled to deliver a speech on the economic outlook on Tuesday, having already dismissed market expectations of a rapid rate cut last week. Elsewhere in the market, U.S. Treasury prices fell slightly, with the 10-year Treasury yield rising 1 basis point to 4.14%. Spot gold broke its record high on the day of the Fed's decision, rising to $3,708 per ounce, a daily gain of over 0.6%.
However, once the rate cuts were implemented, the FOMO that had been building up in the market evaporated, only to increase concerns about the uncertainty surrounding the outlook. The sentiment of "when all good news comes out, it turns into bad news" is likely to resurface.
5. The DAT model craze has cooled down, and the driving force has weakened.
Digital asset treasury companies (DATs), one of the catalysts of this bull market, may have peaked after attracting over $20 billion in funding, rapidly moving from a "blue ocean" to a highly involuted "red ocean." With the share prices of most DATs falling below their net asset values, liquidity pressures are emerging .
According to data from The Block, many DATs are trading at or below their net asset value (NAV). Furthermore, liquidity is also a pressure point for DATs. Coinbase's recent research report clearly stated that the era of easy money and guaranteed net asset value (NAV) premiums is over. The significant premiums previously enjoyed by pioneers like MicroStrategy are eroding, as increased competition, increased execution risk, and tightening regulatory restrictions are leading to a compression of NAV multiples. Some analysts point out that as the DAT market becomes saturated, investors are searching for the next hot spot, with areas like DeFi, RWA, and stablecoins gaining renewed attention .
During the height of the DAT craze, Bitcoin and several other mainstream crypto assets were within the purchase range of corporate treasuries, which undoubtedly drove the rise of related cryptocurrencies. However, as the DAT craze gradually subsides, this model's driving effect on the crypto market will also weaken .
