Recently, the cryptocurrency market has once again experienced severe fluctuations. Bitcoin (BTC) rapidly fell from a high of $124,000 to around $115,000, triggering large-scale liquidations, and altcoins followed suit. Leveraged long positions and contract players are facing a 'bloodbath', with market volatility suddenly increasing, potentially triggering a new round of 'flash crashes'. However, at the same time, potential opportunities for quality mainstream coins and leading altcoins are also emerging.
1. BTC Liquidation Wave: Longs Suffer Heavy Hits.
A few days ago, BTC plummeted from $124,000 to $118,000 in a short time, resulting in $961 million in liquidations, of which about $821 million came from leveraged long positions. In other words, the high-leverage funds chasing the price increase were forced to exit, leading to a sharp decrease in market liquidity.
What is more concerning is that BTC's open interest (OI) remains above $80 billion. Typically, a price drop is accompanied by a simultaneous decrease in OI, but this time OI remains high, indicating that leverage risks have not been fully released. If BTC dips again, the next round of liquidations could exceed $1 billion.
Meanwhile, BTC's dominance (BTC.D) remains around 59%, indicating a return of capital to Bitcoin, while funds are gradually being withdrawn from altcoins. Speculative enthusiasm in derivatives remains high, and the market may experience increased volatility at any time.
2. ETH Leads the Decline, Altcoin Risks Gather.
In this round of decline, it wasn't BTC leading the charge, but rather ETH. Ethereum has dropped over 10% from its peak, breaking below the $4,300 support level, and in the short term may even test $4,100.
This trend has limited impact on spot prices, but is a heavy blow to contract funds. As leverage funds are more concentrated in BTC and ETH, small coins have not yet experienced a chain collapse. However, capital liquidity is becoming centralized, and short-term bottom-fishing strategies should focus on mainstream coins, avoiding reckless investments in small coins.
3. Derivatives Market: Risk of crowded long positions is increasing.
The open interest in BTC perpetual contracts increased by $380 million within 48 hours, with the estimated leverage ratio (ELR) climbing. Binance's BTC/USDT perpetual contract data shows that the long position ratio exceeds 60%.
In the past 24 hours, the total market liquidation amount reached $563 million, of which $485 million came from long positions. The market signal is clear: long positions are overly crowded, and once the price drops, a new wave of liquidations will be triggered immediately.
4. Three Altcoins Worth Watching in the Volatility.
Although short-term risks should not be ignored, some altcoins, supported by policies, technology, or liquidity, still possess the potential for explosive growth in the next bull market.
XRP: Recently surged to $3.66 before dropping 18.5%, but has increased over 423% in the past year. Supported by the launch of the RLUSD stablecoin, pharmacy applications, UN recognition, and the favorable outcome of the SEC lawsuit withdrawal, the RSI is nearing 45, on the edge of oversold territory, presenting a buying opportunity.
SOL (Solana): Market cap exceeds $97.6 billion, with an active DeFi and smart contract ecosystem. If the SEC approves the ETF by the end of the year, SOL is expected to hit $1,000, making it a key focus for institutional funds.
XLM (Stellar): Outstanding advantages in cross-border transfers, with a market cap of about $12.7 billion. It may test its historical high of $0.8756 in the short term, and has potential for continuous growth in the long term.
5. Policy Direction: Powell's Speech Determines the Pace.
This Friday, the global central bank annual meeting will feature a speech by Powell, and the market generally expects signals regarding the interest rate cut path. Historical experience shows that expectations of interest rate cuts often boost BTC, US stocks, and commodities, but the actual effect often comes with 'buy the expectation, sell the fact.'
The interest rate cuts in 2020 led to a bull market, the ETF rumors in 2021 stimulated the market, but peaked after implementation. This time, the market should also be wary of the contrast between policy expectations and actual implementation, which may bring severe volatility risks.
6. Summary and Operation Suggestions.
BTC: Short-term still has downside risk; if key support holds, rebound opportunities can be observed.
ETH: Heavily pressured, cautious in spot trading, high risk in contracts.
Altcoins: Small coin risks remain, but quality coins (XRP, SOL, XLM) can be considered for medium to long-term positioning.
Leverage Trading: Current liquidation pressure is huge; avoid excessive leverage.
Macroeconomic Policy: Pay attention to Powell's speech, as the pace of interest rate cuts may become a market barometer.
Overall, the market is experiencing increased short-term volatility, with risks and opportunities coexisting. Whether one can grasp the key nodes of BTC and ETH will determine if investors can gain an advantage in the next bull market.
