After Bitcoin broke the 100,000 USD mark, it did not stabilize as expected, briefly rising above 100,000 USD around 11 PM yesterday before sliding down, dipping to around 94,150 USD by 5 AM today, and now slightly rebounding to around 96,000 USD.
Although Bitcoin has not experienced a significant drop, the outlook for Ethereum is not optimistic. This morning around 7 AM, it dropped from 4,000 USD to a low of around 3,500 USD before weakly rebounding to around 3,700 USD, with a daily drop of over 5%. With Ethereum unstable, other altcoins are collectively showing signs of 'shaken morale'.
In the past 24 hours, the public chain segment saw SOL drop over 8%, SUI drop over 12%, APT drop over 16%, and SEI drop over 16%. In the AI sector, WLD dropped over 19%, ARKM dropped over 20%, and IO dropped over 12%. In the L2 sector, OP dropped over 14%, and ARB dropped over 17%.
The contract data is dismal. In the past 24 hours, liquidations across the network totaled 1.725 billion USD, with long liquidations at 1.557 billion USD, involving approximately 574,168 people, the largest single liquidation occurring on Binance's ETH/USDT, valued at 16.69 million USD.
If we only consider the number of liquidations, today's liquidation data even surpassed the 100,000 people during the '312 crash'.
The market is in turmoil; what exactly is causing the crash?
There is a significant amount of leverage in the market.
The market is heavily leveraged. With BTC breaking 100,000, there is a global surge in Bitcoin purchases, making it one of the first global assets. There is significant leverage in the system, which will likely lead to one or two severe corrections that 'test your soul'; this leverage will eventually be cleared.
Since Trump's election victory, Bitcoin futures open interest has surged from 39 billion USD on November 5 to as high as 60 billion USD in early December, with trading activity and market speculation increasing dramatically.
Taking the example of the cryptocurrency frenzy in South Korea, data from last month shows that the monthly total trading volume of stablecoins on South Korea's top five CEXs—Upbit, Bithumb, Coinone, Korbit, and GOPAX—was approximately 16.17 trillion KRW (11.5 billion USD). This figure includes the total trading volume of stablecoins such as Tether (USDT) and USDC issued by Circle, and it has increased sevenfold compared to the approximately 2 trillion KRW recorded at the beginning of the year. This also marks the first time that South Korea's monthly stablecoin trading volume has exceeded 10 trillion KRW.
The Ethereum funding rate indicator for futures market sentiment has surged to its 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 experienced a surge in the annualized rate for borrowing USDT, which even exceeded 50% during the recent altcoin frenzy. This data indicates that a considerable number of users are leveraging by borrowing USDT through staking. The on-chain lending leader, AAVE, saw its USDC deposit annualized rate on the Ethereum network reach as high as 46%, while the USDT deposit rate reached 34%.
As of the time of writing, the annualized rates for stablecoins on various exchanges and on-chain lending have returned to normal levels.
Global liquidity continues to decline.
Cryptographic assets are increasingly influenced by macroeconomic factors, while the global liquidity that supports their prices is decreasing.
Additionally, many investors believe that the Federal Reserve will continue to cut interest rates, but many institutions predict that the number of rate cuts may be limited. Morgan Stanley economists expect the Fed to cut rates by 25 basis points in December and January, totaling only 2 cuts.
The liquidity fuel available in the market is decreasing, and price increases will become increasingly weak. The chart above shows that the decline has been quite steep, leading to a correction.
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%.
It may not be the time to sell at the top, but it can be seen as a warning. The recent market is unhealthy, and it usually ends with a collapse of altcoins. The 100,000 USD level for Bitcoin is critical; if Bitcoin can break through and hold, then the current altcoin rebound won't end prematurely, but if Bitcoin cannot hold above 100,000 USD, the altcoins may likely fall back to their starting points.
Although stablecoin-related indicators remain at relatively high levels over the past 12 months, weekly inflows have significantly retreated from a peak of 8 billion USD to 4 billion USD.
This indicator needs to be monitored continuously; if inflows further decrease, it may indicate that the market is entering a prolonged consolidation period, especially during the typically quieter year-end Christmas holiday. Even if the trend of slowing inflows may continue, we remain optimistic about the market performance in 2025. Bitcoin prices are expected to rise steadily, but short-term growth may become moderate.
Additionally, according to CryptoQuant data, during Bitcoin's decline, Coinbase's premium soared.
This kind of rebound usually indicates that when a considerable number of small retail investors experience excessive panic selling, U.S. institutional investors aggressively buy.
