The number of liquidations exceeded the "312 crash".
Author: 1912212.eth, Foresight News
Bitcoin did not stabilize above the $100,000 mark as expected after breaking through it. Around 11 PM last night, it briefly broke through $100,000 but then slid down, reaching around $94,150 around 5 AM this morning, and is now rebounding slightly to around $96,000.
Although Bitcoin did not experience a major decline, the performance of Ethereum is not optimistic. Around 7 AM this morning, it plummeted from $4,000 to around $3,500 before weakly rebounding to around $3,700, a daily drop of over 5%. Ethereum's instability has caused a collective "wavering of morale" among other Altcoins.
In the 24-hour decline, the public chain sector saw SOL drop over 8%, SUI over 12%, APT over 16%, SEI over 16%, the AI sector saw WLD drop over 19%, ARKM over 20%, and IO over 12%. In the L2 sector, OP dropped over 14% and ARB over 17%.
The contract data is distressing. According to Coinglass data, there was $1.725 billion in total liquidations across the network in the past 24 hours, with $1.557 billion in long liquidations, affecting a total of about 574,168 people. The largest single liquidation occurred on Binance's ETH/USDT, worth $16.69 million.
If calculated solely by the number of liquidations, today's data even exceeds the "312 crash" of over 100,000 people.
The market is in a bloodbath, but what is the root cause of the crash?
Excessive leverage in the market
There is a large amount of leverage in the market. As early as December 6, Galaxy Digital CEO Mike Novogratz, in a recent interview with CNBC (commenting on BTC breaking $100,000), warned that there is a global Bitcoin buying frenzy, and that this is one of the first globally-scaled assets. He warned that there is a large amount of leverage in the system, and he is certain that there will be one or two violent corrections that will "test your soul", and these leverages will eventually be cleared out.
Since Trump's victory on November 5, Bitcoin futures open interest has risen sharply, from $39 billion on November 5 to $60 billion in early December, with a frenzy of trading activity and market speculation.
Just looking at the crypto-crazy South Korea as an example, CryptoQuant data last month showed that the total monthly trading volume of the top 5 CEXs in Korea - Upbit, Bithumb, Coinone, Korbit and GOPAX - was about 16.17 trillion won (about $115 billion). This figure includes the total buying and selling of stablecoins such as Tether (USDT) and USDC issued by Circle, and is 7 times the around 2 trillion won recorded at the beginning of the year. This is also the first time the monthly stablecoin trading volume in Korea has exceeded 10 trillion won.
Yesterday, a chart by CryptoQuant analyst ShayanBTC also showed that the Ethereum funding rate indicator in the futures market has soared to its highest level in months, indicating that traders generally expect it to hit a new high. However, the market may need to adjust to maintain this momentum.
Recently, various centralized exchanges such as Binance and Bybit have seen their USDT lending annualized rates exceed 50% at times during the Altcoin frenzy, indicating that a considerable number of users have leveraged by pledging to borrow USDT. The leading on-chain lending platform AAVE has even seen its USDC deposit annualized rate on the Ethereum network reach as high as 46%, and its USDT deposit rate reach 34%.
As of the time of writing, the annualized rates of stablecoins on various exchanges and on-chain lending have returned to normal levels.
Global liquidity is continuously declining
Crypto assets are increasingly affected by macroeconomic factors, while the global liquidity that supports their prices is declining.
In addition, many investors believe that the Fed will continue to cut interest rates, but currently many institutions predict that the Fed may have limited rate cut opportunities. Morgan Stanley's economists expect the Fed to cut rates by 25 basis points in December and January 2023, for a total of only 2 cuts.
The market is providing less and less liquidity fuel, and price increases will become increasingly weak. The chart shows that the decline has been quite steep, to the point that some liquidity analysts have warned of an impending correction.
- In the 2017 cycle, this occurred in December 2017, and the bull market ended a month later.
- In the 2021 cycle, this occurred again in April 2021, and a month later, Altcoins crashed by 50%.
Weiss Crypto analyst Juan M Villaverde, in analyzing this latest crash, said that now may not be the time to sell, but it can be seen as a warning that the recent market is unhealthy, and the end result is always the collapse of Altcoins. $100,000 for Bitcoin is a key level, and if Bitcoin can break through and stabilize above it again, the current Altcoin rebound will not end prematurely, but if Bitcoin fails to stabilize above $100,000, the fate of Altcoins will likely fall back to the starting point.
Matrixport also stated in its analysis that while stablecoin-related indicators are still at relatively high levels over the past 12 months, the weekly inflow has dropped significantly, from a peak of $8 billion to $4 billion.
This indicator needs to be closely monitored, and if the inflow continues to decrease, it may mean that the market will enter a prolonged consolidation period, especially during the typically quieter Christmas holiday season at the end of the year. Even if the slowdown in inflows continues, the market performance in 2025 is still expected to be optimistic. Bitcoin prices are expected to rise steadily, but the short-term gains may tend to be moderate.
Additionally, CryptoQuant data shows that the Coinbase premium has soared during the Bitcoin decline.
This rebound usually indicates that when a considerable number of retail investors appear to be in a state of excessive panic selling, US institutional investors are aggressively buying in.
