Author: 1912212.eth, Foresight News
Bitcoin has not stabilized above the $100,000 mark as expected after breaking through it. Last night around 11 o'clock, after a brief breakthrough of $100,000, it slid all the way down, and by around 5 o'clock this morning it had briefly dipped to around $94,150, and is now slightly rebounding to around $96,000.
Although Bitcoin has not seen a significant decline, the performance of Ethereum is not optimistic. This morning around 7 o'clock, it fell all the way from $4,000 to around $3,500 before weakly rebounding to around $3,700, a daily decline of over 5%. Ethereum's instability has caused the collective "unrest" in the Altcoin market.
In the 24-hour decline, the public chain sector SOL fell by more than 8%, SUI by more than 12%, APT by more than 16%, SEI by more than 16%, the AI sector WLD by more than 19%, ARKM by more than 20%, and IO by more than 12%. In the L2 sector, OP fell by more than 14% and ARB by more than 17%.
The contract data is appalling. According to Coinglass data, in the past 24 hours, the entire network had $1.725 billion in liquidations, with $1.557 billion in long liquidations, a total of about 574,168 people being liquidated, with the largest single liquidation occurring on Binance's ETH/USDT, worth $16.69 million.
If calculated solely by the number of liquidations, today's liquidation data even exceeded the "March 12 crash" of over 100,000 people.
The market is in a bloodbath, but what is the real reason for the plunge?
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), said that a global Bitcoin buying frenzy is underway, and it is one of the first globally-scaled assets. He warned that there is a lot of leverage in the system, and he is confident 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 election victory, Bitcoin futures open interest has risen sharply, from $39 billion on November 5 to $60 billion at the beginning of December, with a frenzy of trading activity and market speculation.
Just looking at the crypto-crazy South Korea as an example, last month CryptoQuant data showed that the total monthly trading volume of the top five 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 also about 7 times the approximately 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, CryptoQuant analyst ShayanBTC's chart also showed that the Ethereum funding rate indicator in the futures market has soared to the highest level in months, with traders generally expecting 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 borrowing annualized rates exceed 50% during the Altcoin frenzy, indicating that a considerable number of users have increased leverage 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 Federal Reserve will continue to cut interest rates, but currently many institutions are predicting that the Federal Reserve may have limited rate cuts. Morgan Stanley's economists expect the Federal Reserve to cut rates by 25 basis points in December and January 2023, only 2 times currently.
The market is providing less and less liquidity fuel, and the price increase 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 plummeted by 50%.
Weiss Crypto analyst Juan M Villaverde, in analyzing this latest plunge, said that now may not be the time to sell at the top, but it can be seen as a warning. The market has been unhealthy lately, 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 is likely to 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 optimistic. Bitcoin prices are expected to rise steadily, but the short-term gains may tend to be moderate.
In addition, according to CryptoQuant data, Coinbase's 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 panic selling, US institutional investors are aggressively buying.
