By Nancy, PANews
In the early morning hours of October 11th, the crypto market witnessed a terrifying scene. Major cryptocurrencies like Bitcoin flash-crashed from their peaks, while altcoins plummeted like a toss-up. Within just a few hours, nearly $20 billion in leveraged funds were liquidated, setting a record for the largest margin call in crypto history.
This sudden storm was a chain reaction triggered by a sudden shift in macroeconomic policy expectations. Excessive leverage, a sharp drop in liquidity, and rapidly escalating panic ultimately triggered a chain reaction. This epic liquidation left behind not only horrific data but also exposed deep structural risks in the market and sparked concerns about future trends.
In this article, PANews summarizes the market's diverse perspectives on cyclical changes and market trends. Overall, this round of sharp volatility in the crypto market represents both a test of deleveraging and a significant signal of a cyclical market correction. Mainstream cryptocurrencies have performed relatively resiliently, while altcoins, facing liquidity depletion and structural risks, may struggle to recover for some projects. In the short term, the market may still experience aftershocks and significant volatility, but from a medium- to long-term perspective, the plunge has unleashed extreme fear and provided a window for rational investment strategies. For investors, the core strategy should be to manage risk, select assets carefully, and invest in phases to avoid being driven by market sentiment.
A comparison of historical data reveals that the scale of this round of liquidations is particularly alarming. weRate co-founder Quinten noted that liquidations during the 2020 COVID-19 crash totaled $1.2 billion, while the 2022 FTX crash saw $1.6 billion in liquidations. This latest round of liquidations reached $19.31 billion. He likened this event to a "contemporary COVID-19 crash," suggesting the market may be in the process of forming a cyclical bottom. This tweet was subsequently retweeted by Binance co-founder CZ, garnering further market attention.
Arthur Hayes, founder of BitMEX, pointed out that the main reason for this sharp drop in altcoin prices is the rumored automatic cross-margin collateral liquidation mechanism on centralized trading platforms. He also stated that this is a rare opportunity for traders who place orders at low prices to buy the dip, and that the prices of many high-quality altcoins will be difficult to return to their previous lows in the short term.
Benson Sun, another crypto influencer, stated that this round of deleveraging is the most thorough in the cycle. Risk leverage has been completely eliminated, and the market bubble has been completely deflated. Despite this, he remains optimistic about the fourth quarter and plans to implement a phased investment strategy over a period of about a month to steadily position himself for the future.
From the perspective of capital structure, the analysis platform CryptoOnchain points out that Bitcoin is currently testing the "cost price defense" of newly entered whales, representing the average holding cost of new large investors. Historically, whales have stubbornly defended this cost price to avoid losses, and this level has repeatedly (twice since August) served as a strong demand bottom. The core question in the current market is whether whales will intervene again to support the market. Therefore, the subsequent trend (i.e., the reaction at key levels) is crucial.
Trader Eugene warned that the market has suffered structural damage and has entered the next phase of the cycle, requiring investors to remain vigilant. DeFiance Capital researcher Kyle added that this plunge can be considered a "cycle-ending event." Despite market panic comparable to the FTX and Celsius crashes, Bitcoin and Ethereum remain relatively robust, demonstrating the evolution of the crypto-industrial complex. However, altcoins continue to suffer repeated tragedies. He emphasized that now may not be the best time to buy the dip, but the release of extreme panic means the market is gradually building a bottom. While there may be room for further decline, in the long run, it is definitely closer to the bottom than the top. He also warned that asset screening is crucial at this time, as many projects may never recover.
From a broader perspective, Bitget's CEO stated in an exclusive interview with PANews that this cycle is characterized by differences from previous ones. Bitcoin pricing power is shifting more towards Wall Street and institutions, significantly increasing its correlation with US stocks, particularly those of tech giants. While the market is currently volatile, it remains at a low level in the long term, making it a good time for investors to re-enter the market. However, those still pursuing aggressive long or highly leveraged strategies should shift to a defensive mode.
Some market observers have further raised caution. Crypto KOL "Hua Shi" bluntly stated that the altcoin season is over. "The market is empty. If individual altcoins can capitalize on a hot topic or favorable news, it will be easy to pull the market up. But if (with a 5% probability) this is a partial rebound at the end of the bull market, then this wave of market correction will have a similar effect to that of May 19, 2021." Crypto analyst @ali_charts similarly believes that the scale and context of this liquidation are highly similar to the 2021 bull market crash. The market is at a local high, leverage is accumulating, and cascading liquidations are triggering, creating a near-repeat of the same scenario. While it's tempting to view this rebound as a buying opportunity, caution is crucial. These large-scale liquidations often signal a shift in market structure rather than a temporary decline. This event may represent a market top, followed by the possibility of a deeper pullback. Strict risk management is essential for those holding long positions at this time. Traders should ensure stop-loss orders are activated and position size is controlled.
Nothing Research Partner Allen Ding added that this level of liquidation will take weeks to recover from. Falls typically don't occur all at once; after an earthquake, there are always aftershocks. In the short term, market liquidity will dry up, volatility will increase, and the market may experience significant fluctuations. However, in the medium to long term, the greater the decline, the greater the potential opportunities for small-cap coins, and gains are often driven by declines.
Well-known crypto analyst CryptoCapo bluntly stated that while altcoins have experienced a historic liquidation, mainstream coins have yet to fully recover, leaving room for further decline. Some currencies may even fall below their current "buy zone." Bitcoin remains firmly above $100,000, but still faces significant downside risk, as it faces a gap to the $60,000-70,000 range required for a full correction. Meanwhile, structural cracks are emerging in traditional markets, which, under certain conditions, could trigger short-term global volatility, paving the way for the next phase of market reopening. He predicts a brief weekend of market consolidation, but further downside is likely to follow as global markets reopen next week.
Crypto researcher Haotian expressed concerns from the perspective of industry development, believing this black swan event has instilled a sense of despair. The current crypto market was once considered a "Three Kingdoms" situation: technical experts driving innovation, exchanges generating traffic, and Wall Street deploying capital. The elites battled, and retail investors reap the spoils. However, after this bloodbath, it became clear that these players may not be competing at all, but rather colluding to harvest all liquidity in the market. Currently, altcoin liquidity has been drained, leaving projects struggling to recover, and the market no longer receptive to innovation. If this situation continues, with exchanges monopolizing the market, Wall Street profiting, and retail technical experts facing a double blow, it will be a devastating blow to the cyclical nature of crypto trading.
