Bitcoin's flash crash from $117,000 to $108,000 in three days was a typical 'leverage accident'. Behind the $477 million long position liquidation in one day was Binance's daily funding rate as high as 0.008% (annualized nearly 30%), creating a 'high-interest frenzy' where traders paid huge funding costs while being harvested by a series of liquidations. This plunge appeared to be a technical breakdown, but the core was the life-and-death divergence between derivatives and spot.
The leverage ratio has soared to 'suicidal' levels, laying the groundwork for disaster. The open interest of Bitcoin perpetual contracts has surged to a two-year high, exceeding 310,000 BTC, with an increase of 41,000 coins in two months. The funding rate has jumped from 3% to nearly 11%, indicating that the bulls have fallen into 'irrational betting', completely ignoring signs of price weakness. History repeats itself: the leverage frenzy of summer 2023 ultimately ended with a major liquidation in August, and this peak is later, suggesting the adjustment period may be longer.
Whale selling became the trigger. Last week, a 'billion-dollar whale' that had been silent for seven years sold 22,400 BTC (about $2.6 billion) and massively shifted funds to Ethereum. This action not only directly triggered follow-up selling pressure but also stimulated a rotation of funds from Bitcoin to Ethereum, accelerating market differentiation. Ethereum broke through $4,950, while Bitcoin fell into a vicious cycle of liquidity loss.
The deadly divergence between derivatives and spot exposes market vulnerability. Futures players are 'stubbornly holding' (financing rates remain high), while spot players are 'jumping off': from August 17 to 25, exchanges saw continuous net inflows, indicating the spread of the selling tide. More dangerously, BTC spot ETFs have seen net outflows of over $1 billion for three consecutive days, with institutional buying retreating, causing prices to lose key support.
In the short term, the risks are far from cleared. If Binance's funding rate does not return to neutral (0.002%-0.003%), high leverage bulls may continue to be 'boiled in warm water'; once the price falls below $108,000, a new round of liquidation will be triggered. The real stabilization signals need to observe two points: first, the return of net inflow in spot ETF funds (like BlackRock and other institutions), and second, the cessation of whale fund rotation (ETH/BTC exchange rate stabilization).
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