Bitcoin has not stabilized after breaking through the $100,000 mark. On the night before last, it briefly broke through $100,000 before sliding down, reaching as low as around $94,150 by 5 AM yesterday, now slightly rebounding to around $97,000.
Although Bitcoin did not experience a significant drop, the trend of Ethereum is not optimistic. Yesterday, at around 7 AM, it fell from $4,000 all the way down to around $3,500, only slightly rebounding to about $3,700, with a daily drop of over 5%. With Ethereum unstable, other altcoins collectively show signs of 'shaken morale'.
In the 24-hour drop, the public chain segment saw SOL drop over 8%, SUI over 12%, APT over 16%, SEI over 16%, and the AI segment WLD over 19%, ARKM over 20%, and IO over 12%. In the L2 segment, OP dropped over 14% and ARB over 17%.
The contract data is grim. According to Coinglass data, there were $1.725 billion in liquidations across the network in the past 24 hours, with long positions liquidated at $1.557 billion, totaling about 574,168 people liquidated, the largest liquidation occurring on Binance's ETH/USDT worth $16.69 million.
If we only count the number of liquidations, today’s liquidation data even exceeds 100,000 people from the '312 crash'.
The market is bleeding heavily; what is the reason for the crash?
There is a lot of leverage in the market.
The market is heavily leveraged. As early as December 6, Galaxy Digital CEO Mike Novogratz, in a recent CNBC interview (commenting on BTC breaking $100,000), stated that a Bitcoin buying craze is sweeping globally, as it is one of the first global assets. He warned that the system's memory is overloaded with leverage, so he is certain there will be one or two severe pullbacks to 'test your soul', and this leverage will eventually be cleared out.
Since Trump’s election victory on November 5, Bitcoin futures open interest has surged significantly, rising from $39 billion on November 5 to $60 billion by early December, with trading activity and market speculation increasing crazily.
Taking the example of the frenzied trading in Korea, last month CryptoQuant data showed that the monthly total trading volume of stablecoins from Korea's top five CEXs—Upbit, Bithumb, Coinone, Korbit, and GOPAX—was about 16.17 trillion KRW ($11.5 billion). This figure includes the total trading volume of stablecoins such as Tether (USDT) and USDC issued by Circle, and has increased sevenfold compared to about 2 trillion KRW recorded at the beginning of the year. This is also the first time that Korea's monthly stablecoin trading volume has exceeded 10 trillion KRW.
Yesterday, analyst ShayanBTC from CryptoQuant showed that the Ethereum funding rate indicator for futures market sentiment has soared to the highest level in months, with traders generally expecting it to reach an all-time high. However, the market may need to adjust to maintain this momentum.
Recently, various centralized exchanges like Binance and Bybit have seen annualized rates for borrowing USDT exceed 50% during the recent altcoin frenzy, indicating that many users are leveraging by borrowing USDT through staking. The on-chain lending leader AAVE saw the annualized rate for USDC deposits on the Ethereum network reach as high as 46%, with USDT deposit rates reaching 34%.
As of the time of publication, the annualized rates for stablecoins on various exchanges and on-chain lending have returned to normal levels.
Global liquidity continues to decrease.
Cryptocurrency assets are increasingly influenced by macroeconomic factors, while the global liquidity that supports their prices is decreasing.
In addition, many investors believe that the Federal Reserve will continue to cut interest rates, but currently, many institutions predict that the number of interest rate cuts by the Federal Reserve may be limited. Economists at Morgan Stanley expect the Federal Reserve to cut rates by 25 basis points in December and January, with only two cuts currently expected.
The liquidity fuel available in the market is decreasing, and price increases will become increasingly weak. The chart shows that its decline has become quite steep, prompting some liquidity analysts to warn of an impending correction.
In the 2017 cycle, this situation occurred in December 2017, and the bull market ended a month later.
In the 2021 cycle, this situation occurred again in April 2021, and a month later, altcoins plummeted by 50%.
Weiss Crypto analyst Juan M Villaverde stated in his analysis of this major drop that it may not be the right time to sell, but it can be seen as a warning that the recent market is unhealthy, and the final outcome is always a collapse of altcoins at a high point. The $100,000 mark for Bitcoin is a key level; if Bitcoin can break through and stabilize again, then this altcoin rebound will not end too soon. However, if Bitcoin cannot stabilize at $100,000, the fate of altcoins is likely to fall back to the starting point.
Matrixport stated in its analysis that stablecoin-related indicators, although still at a relatively high level over the past 12 months, have seen weekly inflows significantly decline, from a peak of $8 billion to $4 billion.
This indicator needs to be closely monitored. If inflows continue to decrease, it may indicate that the market is entering a prolonged consolidation period, especially during the typically quiet year-end Christmas holiday period. Even if the trend of slowing inflows may continue, there remains optimism for market performance in 2025. Bitcoin prices are expected to rise steadily, but the growth may become moderate in the short term.
Additionally, according to CryptoQuant data, during the decline of Bitcoin, the premium on Coinbase surged.
This kind of rebound usually indicates that when a significant number of small retail investors engage in panic selling, American institutional investors are aggressively buying.
