Last night, the cryptocurrency market experienced an unexpected crash, with the total liquidation amount reaching a record $1.75 billion in 24 hours, affecting over 570,000 people, comparable to the '312' event in 2020. From the financial side, policy side to market sentiment, there were almost no obvious negative factors, so why did it suddenly collapse? Let's investigate.
Financial and macro environment: Frequent positive news, no significant pressure in the market.
1. Strong liquidity: Last night, Bitcoin ETF saw a net inflow of $480 million, with BlackRock contributing nearly $400 million; Ethereum ETF also saw inflows reaching $150 million. Such a large flow of funds should have supported Bitcoin's stability.
2. Macro policy support: CME's latest data shows that the probability of a Fed rate cut in December has risen to 90%. Coupled with the CPI data to be announced tomorrow night, the market generally believes that if there is no significant deterioration in inflation data, a rate cut is a foregone conclusion.
3. Multiple positive news:
Russian lawmakers propose to include Bitcoin in strategic reserves.
MicroStrategy added $2.1 billion, purchasing 21,550 Bitcoins.
Trump's second son publicly stated that rational regulation would make the U.S. the 'cryptocurrency capital'.
Domestic monetary policy is moderately loose, providing support for the market.
Overall, there are no significant negative factors from either the financial side or macro policies, but rather frequent positive news.
Trigger for the crash: Breakthrough in Google's quantum computing technology.
Around midnight last night, Google's CEO announced that its latest quantum computing chip 'Willow' achieved breakthrough results in benchmark tests: completing a task that would take a top supercomputer 10^25 years in under 5 minutes. This news quickly ignited the tech community, with Musk and OpenAI's Altman expressing shock and congratulations.
However, this breakthrough news triggered panic in the market. The powerful performance of quantum computing could pose a threat to the cryptocurrency market, especially concerning the potential to crack blockchain encryption algorithms, leading to panic selling among investors.
Market sentiment and liquidation tragedy: High leverage is the 'culprit'.
1. High leverage long positions: In the context of multiple positive factors, many investors chose high-leverage long positions overnight, and excessive confidence led to a surge in liquidations during the crash.
2. Structural market impact: The newly launched Move contract on Binance had a trading volume of up to $1.1 billion in 24 hours. The launch of such large-scale new products typically has a short-term adverse impact on the market, exacerbating price volatility.
Risk management is crucial.
This sharp decline did not stem from direct negative factors in finance or policy, but rather from the market's collective reaction to potential technological threats. The cryptocurrency market is highly volatile, especially in the context of major technological breakthroughs or macro events, and investors need to remain vigilant, manage risks appropriately, and avoid heavy losses caused by emotional trading.
This crash again reminds us that regardless of positive or negative factors, one cannot ignore the potential black swan events in the market; only by taking precautions in advance can one remain invincible in the cryptocurrency market.