Hello everyone, I am your old friend Gray Sky Mage. Today, let's talk about this flash crash in the crypto market that left countless people bewildered. Just 48 hours ago, the market was still immersed in the optimism brought by Powell's speech last Friday, with the crypto circle in a festive mood. However, who could have imagined that within less than two days, $BTC and $ETH both performed high dives, the prices collapsed, and hundreds of millions of dollars in long positions vanished into thin air. What exactly is going on? Let's review this thrilling plunge together.
The starting point of the story is a mysterious whale. This big player suddenly transferred about 24,000 BTC (worth about $2.7 billion at the time) to an exchange last Sunday and conducted a massive sell-off in a short time. This huge sell order directly broke through the market buy orders in just 20 minutes, causing the price of $BTC to plummet, breaking through multiple key support levels.
This sharp decline is not an isolated incident. Data shows that the price of $BTC once fell below $110,000, and $ETH was not spared, with a decline even exceeding that of BTC at one point. Why? Because the chain reaction in the crypto circle never shows mercy.
A sell order of 24,000 BTC, theoretically, may not directly break through multiple layers of buy orders in a market with weekday depth. However, the power of this decline is far more than just a simple whale sell-off. The key lies in the fact that the rapid price drop directly broke through the technical support levels of $BTC (such as the strong supports at 115,000 and 112,000), triggering a large number of high-leverage long position liquidations.
According to market statistics, this wave of decline has led to approximately $550 million to $840 million in leveraged long positions being forcibly liquidated across the market. These liquidated positions have turned into new sell orders flooding the market, further pushing prices down.
This has formed the most classic vicious cycle in the crypto circle: price drop → forced liquidation → more sell orders → price continues to drop. The whole process is like a domino effect, unstoppable.
This flash crash did not happen out of nowhere. By reviewing the market background, we can find more clues. Recently, the U.S. spot Bitcoin ETF has seen a net outflow for six consecutive trading days, with a total outflow amount exceeding $1.4 billion. This indicates that institutional confidence in the crypto market is wavering. Not to mention, the overall net outflow of crypto investment products has also reached a recent high.
What's more critical is that one of the most important indicators in today's market—BTC ETF net inflow—has turned negative. This means that the institutional funds that once drove BTC prices to surge are now beginning to shift towards a bearish outlook in the short term. The whale's sell-off was just the spark that ignited the fuse; the real fuel was the sharp deterioration in market sentiment.
If BTC is the protagonist of this crash, then $ETH is undoubtedly the biggest victim. Many people may not understand why, when BTC falls, ETH suffers along with it, or even falls harder than BTC.
There are two reasons for this. Firstly, many traders use a **unified margin account, and the sharp drop in BTC leads to a reduction in account equity. To control risk, exchanges will directly liquidate all long positions in the account (including ETH) together. Therefore, ETH longs not only did not escape unscathed but became 'collateral victims.'
Secondly, the habits of market makers have also exacerbated the tragedy for ETH. Many institutions will market-make BTC and ETH together. After BTC broke down, institutions directly reduced their entire portfolio to lower risks. As a result, ETH was sold off alongside BTC.
Of course, this sell-off was clearly intentional. The whale did not use icebergs or OTC trades; directly crashing the market can quickly trigger panic among retail investors, leading to a wave of liquidations, achieving the effects of low-price replenishment, cleansing retail investors, or undermining confidence. Although iceberg orders or OTC trades are more discreet, they cannot cause such a large market upheaval in a short time.
