Behind the wave of liquidations in the crypto market: the truth of leveraged retreat and the game of human nature

Last night’s "$600 million liquidation in one hour" in the crypto market stands in stark contrast to the "$100 million liquidation in one hour" early yesterday morning, with the total liquidation scale for the day ultimately settling at $1.2 billion. This sudden "liquidation storm" seems fierce, but it actually hides key signals—compared to the trend of "liquidation volume continuously decreasing under equivalent trading volume" after October 11, this concentrated cleanup appears more like the "final harvest" of the market's remaining leverage, also indicating that leveraged speculators are accelerating their exit, which is precisely an important prerequisite for the market's subsequent stabilization and rise.

The logic of market panic often lies in the details. When a cryptocurrency drops from $10 to $0.1, most people actually do not feel real panic—because such a large drop feels more like "boiling a frog in warm water," or is regarded as a normal trend decline; but when it further falls from $0.1 to $0.08, the market's panic sentiment can instantly amplify. The reason is simple: during the former drop, investors still hold the illusion that "perhaps it could rebound," or are already numb; while the latter drop occurs within a range that "seems to have already bottomed out," breaking people's expectations of a "bottom," triggering extreme anxiety about "will it drop to zero."

Ultimately, all of this is a game of human nature. In the market, people are constantly oscillating between "greed" and "fear": just like when zec surged a couple of days ago, clearly at a relatively high position, yet many still expected it to rise to $10,000, dominated by the greed of "it can still go higher"; but when a cryptocurrency slightly drops at a low position, it is quickly engulfed by the fear of "it could go even lower," hastily cutting losses. The real shift from bull to bear often occurs amidst excitement and optimism—no one believes the rise will end until the trend suddenly reverses; while true panic tends to explode when the market appears to be at a bottom— the closer one gets to the real bottom, the more easily people are scared away by short-term fluctuations, ultimately missing opportunities.

Currently, the total market capitalization of the crypto market remains at $3.5 trillion, overall not having exited the fluctuation range. Instead of getting entangled in the emotional impact brought by short-term liquidations, it is better to focus on the core change of "reduced leverage"—as market speculation gradually decreases and the chip structure becomes increasingly solid, it actually favors the unfolding of subsequent market trends.