Economic recession concerns lead to a sharp drop, and leverage explosion events usher in a bargain hunting opportunity

U.S. stocks plummeted last night, with the Nasdaq index falling 4% and the lowest point falling more than 5%. Large technology stocks plummeted, such as Tesla fell more than 15% and Nvidia fell more than 5%. Cryptocurrency-related listed companies fell more than 10%, such as MSTR fell 16.88% and Conbase fell more than 17%.

Bitcoin fell below $77,000 and Ethereum fell below $1,800. Altcoins were once again slaughtered, with most altcoins hitting new lows again. Market sentiment was extremely panic-stricken and liquidity was frozen.

Analysts at the StarEx exchange believe that the fall of Bitcoin to around $75,000 and the fall of Ethereum below $1,800 are short-term bottoms because Ethereum has encountered a large amount of fund liquidation, and altcoins are experiencing the largest altcoin liquidation since the collapse of LUNA in May 2022. The market has seen liquidations of approximately $10 billion, far exceeding the scale after the collapse of FTX.

The occurrence of leverage explosion events may mean that a stage bottom has arrived, ushering in an opportunity to buy at the bottom.

The crypto market plunge this time was superficially caused by the realization of favorable expectations about Trump's Bitcoin strategic reserves and the crypto summit. The deeper reason was that the market was generally worried about the risk of a sharp drop in U.S. stocks and a U.S. economic recession. Institutions liquidated their positions and waited and watched. Market sentiment was extremely panic, and liquidity was instantly frozen.

During his campaign, Trump promised to include Bitcoin in the national strategic reserve and strongly supported the development of the crypto industry, which once pushed BTC from $70,000 to $110,000. However, from the current perspective, Trump's promise was strictly "fulfilled", but it was more verbal, and the market did not usher in substantial capital inflows.

StarEx exchange analysts believe that from a macro perspective, the crypto market currently lacks new potential benefits and ecological narratives, which has become one of the key reasons why funds dare not enter the market. The greater risk lies in the extreme concerns of institutional investors about the trend of US stocks. Although the Federal Reserve has repeatedly emphasized that the US economy is still strong, the market is obviously not buying it. Institutional investors have reduced their holdings for safety reasons and choose to wait and see.

At present, the BTC allocation of large financial institutions in the United States mainly relies on ETFs, especially BlackRock and Fidelity. However, recently, the funds of these two institutions have been in a state of net outflow. When the market adjusted before, BlackRock's funds continued to flow in, and now the continuous selling shows that institutions are indeed withdrawing from the market. Both ETFs and super retail investors MSTR bought BTC frantically when it rushed to $100,000, but when the price fell back to $80,000, the market almost fell silent, and few institutions were willing to take over even at a lower price.

The core issue that institutional funds are most concerned about at present is whether the US economy will enter a recession and whether US stocks will enter a bear market. The "Trump trade" has evolved into a "recession trade." In an interview, Trump was asked whether he expected a recession this year. He responded: "I hate predicting such things. There is a transition period because what we are doing is very big. We are bringing wealth back to the United States, which is a big deal." U.S. Treasury Secretary Bessant also warned last week that the U.S. economy may go through a difficult period during this economic transition.

At the same time, the liquidity crisis in the crypto market has further intensified. Binance recently banned several market maker accounts because these accounts sold millions of dollars in net sales within 24 hours without any buying action. Many project parties seem to just want to sell their chips as soon as possible, and the price is no longer a factor they consider. After all, for them, these chips have no cost, and any sale is pure profit. Retail investors are still the main buyers in the market.

Analysts at StarEx Exchange believe that those useless altcoins and meme coins in the market should be stayed away from as much as possible. Only the leading altcoins in their respective fields may see a rebound in the future. For institutional funds, they will not rush into the market unless the bear market risk of U.S. stocks is eliminated and the shadow of economic recession is not dissipated, unless the market plummets to a relative bottom. However, today's leverage explosion incident has also contributed to a stage-by-stage bottom, so you can enter the market on dips to buy at the bottom.