Amidst the dramatic volatility in the cryptocurrency market, rumors circulating in online communities that a major institution is about to be liquidated have triggered panic among investors. Evgeny Gaevoy, CEO of Windemute, one of the world's largest cryptocurrency market makers, published a lengthy post last night on the X platform explaining why he is "strongly skeptical" of such rumors.
Gaevoy points out that historically, major events such as the collapse of 3AC Capital after the Terra incident and the exposure of risks during FTX's bailout discussions with Binance were quickly confirmed through internal communication channels. However, no similar signs have been observed at present, and related rumors mostly come from "anonymous accounts lacking credibility."
Three key observations
Gaevoy's argument is based on three key observations:
First, exchanges have learned from the painful lessons of 2022 in terms of risk management. He mentioned that exchanges now generally use mechanisms such as "automatic deleveraging" (ADL) to avoid losses, which means that when extreme market conditions occur, the system will automatically match profitable positions with losing positions to prevent losses from escalating indefinitely.
Secondly, the likelihood of institutions repeating FTX's mistakes (investing user deposits in illiquid assets) is low. The core issue of the FTX collapse in 2022 was that the exchange misappropriated customer funds to invest in high-risk positions at its affiliated company, Alameda Research. Today, mainstream exchanges generally provide proof of reserves, increasing transparency.
Third, Gaevoy emphasized the extremely high legal risks of publicly denying rumors: "If a company is truly bankrupt, publicly denying it is a very risky thing, especially if the company is located in Europe, the United States, the United Kingdom, or Singapore, and may face the consequence of being sued." This statement implies that institutions willing to come forward to clarify are usually indeed without problems.
Eric Balchunas, senior ETF analyst at Bloomberg, offered another perspective. He acknowledged that he had previously underestimated the selling pressure from early holders reducing their positions at high levels, but pointed out that this was fundamentally different from a systemic crisis: it was simply normal profit-taking, not a signal of institutional collapse.
Periodic adjustment rather than systemic collapse
In summary, Gaevoy believes the current market downturn is more of a cyclical adjustment than a harbinger of a systemic crisis. This contrasts sharply with the situation in 2022, when the crash stemmed from the failure of Terra/Luna's algorithmic stablecoins and FTX's fraudulent activities—both structural problems.
However, this does not mean the market has bottomed out. Analysis by hedge fund veteran Gary Bode points out that the main drivers of this decline include: market expectations of a hawkish policy from new Federal Reserve Chairman Walsh, selling pressure from margin calls, and profit-taking by large investors. These factors may still put downward pressure on prices in the short term.
Investors should be cautious about rumors circulating on social media, and also recognize that market volatility is an inherent characteristic of crypto assets. As Coinbase CEO Brian Armstrong stated in a post on the same day, "The crypto market has experienced many cyclical fluctuations, and this does not change my long-term bullish view on cryptocurrencies."
