The cryptocurrency market recently experienced a wave of correction, with Bitcoin dropping from $100,000 to around $94,150 and altcoins showing a weaker trend. Ethereum also fell from $4,000 to $3,500 before rebounding slightly to around $3,700. The number of liquidations during this correction exceeded 100,000, which was more than the “312 crash”.
Bitcoin did not stabilize after breaking the $100,000 mark. On the night of the day before yesterday at 11 PM, it briefly surpassed $100,000 and then continued to decline. By yesterday around 5 AM, it had dropped to around $94,150, and it is currently rebounding to around $97,000.
Although Bitcoin did not experience a significant decline, the trend of Ethereum is not optimistic. Yesterday at around 7 AM, it fell from $4,000 to its lowest point of around $3,500 before weakly rebounding to around $3,700, with a daily decline of more than 5%. Ethereum’s instability has led to the collective “waver” of other altcoins.
In the past 24 hours, SOL in the public chain sector has dropped by more than 8%, SUI by more than 12%, APT by more than 16%, SEI by more than 16%, AI sector WLD by more than 19%, ARKM by more than 20%, and IO by more than 12%. In the L2 sector, OP has dropped by more than 14% and ARB by more than 17%.
The contract data is also dismal. According to Coinglass data, there were liquidations worth $1.725 billion in the past 24 hours, with long liquidations accounting for $1.557 billion. In total, about 574,168 people were liquidated, with the largest liquidation occurring on ETH/USDT on Binance, worth $16.69 million.
If we only consider the number of liquidations, today’s data even exceeds the 100,000 people from the “312 crash”.
What is the reason behind this market bloodbath?
There is a large amount of leverage in the market.
There is a large amount of leverage in the market. As early as December 6th, Mike Novogratz, the CEO of Galaxy Digital, stated in a recent interview with CNBC (evaluating BTC breaking $100,000) that there is a global wave of Bitcoin buying frenzy, making it one of the first global assets. He warned that the system memory is full of leverage, so he is convinced that there will be one or two violent pullbacks that will “test your soul,” and this leverage will eventually clear it.
Since Trump’s victory on November 5th, the open interest of Bitcoin futures has risen sharply, from $39 billion on November 5th to $60 billion in early December, with trading and market speculation activities increasing crazily.
Taking the crazy speculation in South Korea as an example, CryptoQuant data from last month showed that the total monthly trading volume of stablecoins on the top five CEXs in South Korea, including Upbit, Bithumb, Coinone, Korbit, and GOPAX, was about 16.17 trillion Korean won ($11.5 billion). This figure includes the total buying and selling volume of stablecoins such as Tether (USDT) and USDC issued by Circle, which is seven times higher than the record of about 2 trillion Korean won at the beginning of the year. This is also the first time that South Korea’s monthly stablecoin trading volume has exceeded 10 trillion Korean won.
Yesterday, the chart by CryptoQuant analyst ShayanBTC also showed that the Ethereum funding rate indicator for the futures market sentiment had soared to its highest level in months, and traders generally expect it to reach a new all-time high. However, the market may need to adjust to maintain this momentum.
During the recent altcoin frenzy, centralized exchanges such as Binance and Bybit had an annualized interest rate for borrowing USDT of over 50% at one point, indicating that many users increased leverage by pledging and borrowing USDT. AAVE, the leader in on-chain lending, had an annualized interest rate for USDC deposits on the Ethereum network that reached a peak of 46% and a USDT deposit rate of 34%.
As of now, the annualized interest rates for exchanges and on-chain lending stablecoins have returned to normal levels.
Global liquidity is decreasing.
Cryptocurrencies are increasingly affected by macroeconomic factors, while global liquidity, which supports their prices, is decreasing.
In addition, many investors believe that the Federal Reserve will continue to cut interest rates, but some institutions predict that the Federal Reserve may have limited interest rate cuts. Morgan Stanley economists predict that the Federal Reserve will cut interest rates by 25 basis points in December and January next year, with only two cuts currently.
The less liquidity the market can provide, the weaker the price increase will be. The steepness of the decline in the chart is already considerable, to the point where some liquidity analysts warn that a correction is imminent.
This situation occurred in December 2017 during the previous cycle, and the bull market ended a month later.
In April 2021 during this cycle, the same situation occurred again, and a month later, altcoins plummeted by 50%.
Juan M Villaverde, an analyst at Weiss Crypto, stated in his analysis of this major drop that it may not be the time to sell now, but it can be seen as a warning that the market has been unhealthy recently, and its final result is always the collapse of altcoins. Bitcoin’s $100,000 is a key level, and if Bitcoin can break through it again and stabilize, then the rebound of altcoins will not end prematurely. However, if Bitcoin cannot stabilize at $100,000, the fate of altcoins is likely to fall back to the starting point.
Matrixport also stated in its analysis that although stablecoin-related indicators are still at relatively high levels in the past 12 months, the weekly inflows have significantly declined from a peak of $8 billion to $4 billion.
This indicator needs to be continuously monitored. If the inflows continue to decrease, it may indicate that the market will enter a longer period of consolidation, especially during the Christmas holiday season, which is usually a quieter period. Even if the trend of slowing inflows continues, the market performance for 2025 remains optimistic. The price of Bitcoin is expected to steadily rise, but the short-term gains may be more moderate.
In addition, according to CryptoQuant data, Coinbase’s premium has soared during the Bitcoin downturn.
This rebound usually indicates that when many small retail investors panic and sell excessively, U.S. institutional investors aggressively buy in.