Author: Nancy, PANews
Coinciding with the fifth anniversary of the 312 incident, the crypto market once again experienced an across-the-board decline, and the large-scale liquidation wave on the chain exacerbated the panic in the market.
More than $120 million in on-chain liquidation may occur, and the risk of liquidation of whales holding over 100 million yuan is increasing
As multiple negative emotions such as the growing concerns about the US economic recession fermented, the crypto market suffered another cyclical blow, and market confidence suffered a severe setback. According to CoinGecko data, the total market value of the crypto market fell to $2.66 trillion in the past 24 hours. The price of Bitcoin has fallen below $80,000, and the price of Ethereum has even dropped below $2,000.
In this market environment, the continued decline in Ethereum prices has significantly magnified the risk and scale of on-chain liquidations. According to DeFiLlama data, Ethereum has a potential on-chain liquidation of nearly $124.8 million at a price of $1,830.08. This liquidation mainly comes from the MakerDAO protocol, with a scale of $124.5 million, accounting for as much as 99.7%.
To avoid forced liquidation, some whales had to bear the pain of selling their stocks. For example, according to PyShield monitoring, an address holding 6,370 weETH (total debt of about $10 million) and 1,500 weETH (total debt of about 2.27 million DAI) leveraged long positions have been liquidated. After the price of ETH fell below $1,800, the two whales had 2,160 rETH (worth about $4.63 million) and 643.78 weETH (worth about $1.23 million) confiscated respectively; DeBank showed that an Aave whale 0xa33...e12c sold 25,800 ETH to lower the liquidation line to avoid liquidation, with a leveraged loss of $31.75 million.
At the same time, many whales of the MakerDAO protocol are also facing liquidation pressure, but the OSM mechanism of the protocol has demonstrated its ability to withstand pressure in the current environment. It is understood that due to the use of the Oracle Security Module (OSM) by Maker, there is a delay of about 1 hour in the system price update (the median is calculated as a reference price through the Medianizer contract to prevent short-term fluctuations from being maliciously exploited), which provides these investors with additional collateral to avoid liquidation, and some of the whales have taken action to save themselves. At present, the Maker oracle price is still $1,806.31, and the ETH price has rebounded. The latest oracle price is also higher than these liquidation lines. These whales have temporarily avoided the risk of forced liquidation.
For example, Summer.fi data shows that a whale (address 0xab...2313) holding 67,000 ETH (about $124 million) sold 2,882 ETH (about 5.21 million DAI) for repayment before the oracle price update at 10:00, reducing the liquidation price from $1,798 to $1,781. Another address (0x22...1246) suspected to belong to the Ethereum Foundation deposited 30,098 ETH (about $56.08 million) to Maker 5 hours ago, increasing its total holdings in Maker to 100,394 ETH (about $185 million), and the liquidation price also dropped to $1,127.06; a Maker whale (address 0x6b...30b3) holding 60,810 ETH (about $109 million) had a liquidation price of $1,798.72.
As the liquidation activities and risks on the chain intensify, the self-rescue of whales and the stress resistance of system mechanisms are testing the resilience of the crypto market. Once the market deteriorates further, the space for whales to maneuver funds will be further limited, and these leveraged players may face more severe challenges. More large-scale liquidation events may intensify the downward pressure on the market, forming a vicious cycle.
Crypto market resilience faces a big test, still waiting for key catalysts
Under the interweaving of global macro pressure and crypto liquidation deleveraging, the resilience of the crypto market is facing severe tests. Market analysts generally believe that the uncertainty of the global macro economy and the expectation of tightening monetary policy of the Federal Reserve are the main drivers of the sharp correction of crypto assets.
According to Bloomberg, escalating tariff war tensions and weakening expectations of further interest rate cuts from the Federal Reserve offset the positive impact of a series of pro-cryptocurrency statements from U.S. President Trump last week. Risk assets such as cryptocurrencies have been under pressure since the Federal Reserve hinted at a pause in rate cuts in mid-December last year. Last Friday's employment data showed that the U.S. unemployment rate rose from 4% to 4.1%, further exacerbating market uncertainty. Augustine Fan, partner at SignalPlus, a provider of crypto derivatives software, said, "The surge in the 'underemployment' rate to a five-year high has heightened recession concerns and pushed yields lower as expectations for rate cuts are brought forward to early summer."
Nexo analysts also pointed out that the Fed is now facing a difficult policy environment. Although weaker job growth supports the case for rate cuts, persistent inflation concerns - especially those stemming from supply-side constraints and geopolitical uncertainties - may prompt the Fed to act cautiously, and the uncertain environment may put pressure on the cryptocurrency industry.
Deutsche Bank analyst Marion Laboure said that in the absence of clear details of Trump's Bitcoin reserve plan, the volatility of cryptocurrencies may remain high. There is uncertainty about the timetable, funding and allocation of the plan. The market is cautious and expects to make profits if the plan goes well, but may suffer losses if it encounters setbacks.
Matrixport also stated in its latest report that the White House Crypto Summit and the confirmation of the US strategic Bitcoin reserve failed to ignite market sentiment, the crypto market did not see a significant rise, and the perpetual contract funding rate remained at a single-digit level. This shows that retail investors' enthusiasm remains sluggish, in stark contrast to April and December 2024, when funding rates soared to double-digit highs. Even the market momentum brought about by Trump's official inauguration was relatively flat, clearly indicating that Bitcoin still needs a more influential catalyst to usher in a new round of gains.
"Bitcoin's price movement is closely tied to U.S. economic indicators. Here is a possible scenario: If a recession occurs, Bitcoin's maximum potential drop is about $50,000; if no recession occurs, its floor is expected to be between $70,000 and $75,000. Key market observers are closely watching the Consumer Price Index (CPI) data released on Wednesday, which could have a significant impact on Bitcoin's price movement," DeFi analyst Adaora Favour Nwankwo said in a post.
According to Bravos Research, the current crypto market is experiencing the largest altcoin liquidation since the LUNA crash in May 2022. The market has seen about $10 billion in liquidations, far exceeding the situation after the FTX crash. Data shows that Bitcoin's dominance continues to rise, indicating that there are no obvious altcoin season signals in the short term.
Arthur Hayes, co-founder of BitMEX, believes that Bitcoin is a truly free market, while the stock market is subject to policy intervention. Therefore, when there is a fiat currency liquidity crisis, the price of BTC tends to lead the stock market to fall and also to lead the stock market to rebound. Bitcoin may bottom out around $70,000, which is equivalent to a 36% correction from the historical high of $110,000, which is a normal adjustment in a bull market. The next step is to pay attention to the plunge of US stocks (SPX, NDX) and the bankruptcy of traditional financial institutions. Subsequently, the Federal Reserve, the People's Bank of China, the European Central Bank and the Bank of Japan may adopt loose policies to stimulate the economy. He suggested that traders wait patiently. If the risk appetite is high, they can try to buy at the bottom; if they are more stable, they should wait for the central bank's policy to turn before re-positioning to avoid the psychological pressure caused by long-term sideways trading or potential floating losses.
Degen Spartan suggested that the crypto market has gradually evolved from a "winner's game" that required superb technical skills in the early days to a "loser's game". The core of the crypto market is "don't die". By avoiding unnecessary risks, those who survive will have the opportunity to wait for future opportunities in the market.
