Author: Nancy, PANews

On the fifth anniversary of the 312 incident, the crypto market has once again encountered a widespread downturn, with large-scale liquidations on-chain exacerbating market panic.

Potential Over $120 Million in On-Chain Liquidations, Risks of Liquidation for Whales Holding Over $100 Million Intensify

As concerns about a recession in the U.S. economy and other negative sentiments escalate, the crypto market has faced another cyclical blow, severely undermining market confidence. According to CoinGecko, the total market capitalization of the crypto market has dropped to $2.66 trillion in the past 24 hours. Bitcoin's price has fallen below $80,000, while Ethereum's price has dipped below $2,000.

In this market environment, the continuous decline in Ethereum's price has significantly amplified the risks and scale of on-chain liquidations. Data from DeFiLlama shows that at the price level of $1,830.08, there is nearly $124.8 million in potential on-chain liquidations for Ethereum. This liquidation primarily comes from the MakerDAO protocol, amounting to $124.5 million, accounting for as much as 99.7%.

To avoid forced liquidations, some whales have had to take painful losses. For instance, according to Pionex monitoring, an address holding 6,370 weETH (with a total debt of about $10 million) and another holding 1,500 weETH (with a total debt of about 2.27 million DAI) has been liquidated. After ETH's price fell below $1,800, these two whales had 2,160 rETH (worth about $4.63 million) and 643.78 weETH (worth about $1.23 million) seized; DeBank shows that a whale on Aave, 0xa33…e12c, sold 25,800 ETH to lower the liquidation threshold, incurring a leveraged loss of $31.75 million.

Meanwhile, several MakerDAO protocol whales are also facing liquidation pressure, but the protocol's OSM mechanism has demonstrated resilience in the current environment. It is understood that due to Maker's use of the Oracle Security Module (OSM), there is about a one-hour delay in system price updates (calculating the median as a reference price through the Medianizer contract to prevent short-term fluctuations from being maliciously exploited), which provides these investors with the opportunity to add collateral to avoid liquidation. Some whales have already taken action to save themselves. Currently, the Maker oracle price remains at $1,806.31, and with ETH's price rebounding, the latest oracle price is also above these liquidation thresholds, allowing these whales to temporarily avoid the risk of forced liquidation.

For example, data from Summer.fi shows that a whale holding 67,000 ETH (about $12.4 million) (address 0xab…2313) reduced its position by 2,882 ETH (about 5.21 million DAI) before the oracle price update at 10 AM, lowering the liquidation price from $1,798 to $1,781. Another address suspected to belong to the Ethereum Foundation (0x22…1246) deposited 30,098 ETH (about $56.08 million) into Maker five hours ago, increasing its total holdings in Maker to 100,394 ETH (about $185 million), which also lowered the liquidation price to $1,127.06; a Maker whale holding 60,810 ETH (about $10.9 million) (address 0x6b…30b3) has a liquidation price of $1,798.72.

As on-chain liquidation activities and their risks intensify, the self-rescue efforts of whales and the resilience of the system mechanisms are both testing the crypto market's resilience. If the market further deteriorates, the liquidity space for these whales will be further restricted, and these leveraged players may face more severe challenges, with more large-scale liquidation events potentially exacerbating downward pressure on the market, creating a vicious cycle.

Crypto Market Resilience Faces Major Test, Awaiting Key Catalysts

Amid the intertwining global macro pressures and the crypto market's deleveraging wave, the resilience of the crypto market is facing a severe test. Market analysts generally believe that the uncertainty of the global macro economy, combined with expectations of tightening monetary policy from the Federal Reserve, is the main driver behind the significant pullback in crypto assets.

According to Bloomberg, the escalating tensions of the tariff war and the diminishing expectations for further interest rate cuts from the Federal Reserve have offset the positive impact of a series of statements supporting cryptocurrencies made by U.S. President Trump last week. Since the Federal Reserve hinted at pausing interest rate cuts in mid-December last year, risk assets like cryptocurrencies have been under pressure. Last Friday's employment data showed that the U.S. unemployment rate rose from 4% to 4.1%, further exacerbating market uncertainty. Augustine Fan, a partner at crypto derivatives software provider SignalPlus, stated, "The 'underemployment' rate has surged to a five-year high, heightening concerns about a recession and pushing yields lower, as rate cut expectations are being brought forward to early summer."

Nexo analysts also pointed out that the Federal Reserve is now facing a challenging policy environment. While weak job growth supports the case for rate cuts, ongoing inflation concerns—especially those stemming from supply-side constraints and geopolitical uncertainties—may prompt the Federal Reserve to act cautiously, and the uncertain environment could put pressure on the cryptocurrency industry.

Deutsche Bank analyst Marion Laboure stated that in the absence of clear details regarding Trump's Bitcoin reserve plan, the volatility of cryptocurrencies may remain high. There is uncertainty regarding the timeline, funding, and allocation of this plan. The market is taking a cautious stance, expecting profits if the plan progresses smoothly, but potentially incurring losses if it encounters setbacks.

Matrixport also stated in its latest report that the White House crypto summit and the confirmation of the U.S. strategic Bitcoin reserve failed to ignite market sentiment, with no significant rise in the crypto market, and perpetual contract funding rates still hovering at single-digit levels. This indicates that retail investor enthusiasm remains low, in stark contrast to April and December 2024, when funding rates soared to double-digit highs. Even the market momentum brought by Trump's official inauguration is relatively muted, clearly indicating that Bitcoin will need more influential catalysts to usher in a new round of increases.

"The price movement of Bitcoin is closely related to U.S. economic indicators. One possible scenario is: if a recession occurs, Bitcoin's maximum potential drop could be around $50,000; if no recession occurs, its bottom price is expected to be between $70,000 and $75,000. Key market observers are closely watching the Consumer Price Index (CPI) data to be released on Wednesday, which could significantly impact Bitcoin's price movement," stated DeFi analyst Adaora Favour Nwankwo.

According to Bravos Research analysis, the current crypto market is experiencing the largest scale of altcoin liquidations since the LUNA collapse in May 2022. Approximately $10 billion in liquidations have occurred in the market, far exceeding the situation after the FTX collapse. Data shows that Bitcoin's dominance continues to rise, indicating that there are no clear signals of an altcoin season in the short term.

BitMEX co-founder Arthur Hayes believes that Bitcoin represents a true free market, while the stock market is subject to policy intervention. Therefore, during a fiat liquidity crisis, BTC's price often leads the stock market down and also rebounds ahead of the stock market. Bitcoin may bottom out around $70,000, which corresponds to a 36% correction from its historical high of $110,000, a normal adjustment within a bull market. The next focus should be on the sharp decline of U.S. stocks (SPX, NDX) and the bankruptcy of traditional financial institutions, after which the Federal Reserve, the People's Bank of China, the European Central Bank, and the Bank of Japan may adopt easing policies to stimulate the economy. He suggests that traders be patient; if they have a higher risk appetite, they can try to buy the dip; if they prefer a more conservative approach, they should wait for a shift in central bank policy before heavily investing to avoid the psychological pressure of prolonged sideways movement or potential floating losses.

Degen Spartan suggests that the crypto market has gradually evolved from an early "winner's game" requiring high technical skills to a "loser's game." The core of the crypto market is "don't die"; by avoiding unnecessary risks, survival provides the opportunity to wait for future market opportunities.

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