Many people think it was caused by Wintermute's selling, but in fact, the root cause was Binance changing the rules. Although Binance announced it in advance, the actual impact far exceeded expectations.

**Why does rule change lead to a crash?**

Next, I will gradually analyze this causal chain:

1. **Impact of rule changes**

- Binance adjusts the contract position limits and leverage ratios, originally to control risk and avoid excessive speculation or market manipulation.

- For example, the position limit is lowered: An account that could originally hold $10 million in contract positions now has the limit reduced to $5 million, and positions exceeding the limit must be reduced or liquidated.

- Reduced leverage: High leverage (like 100x) allows a small amount of capital to control a large position, and after leverage is reduced, the position that the same capital can control becomes smaller, and the excess must be liquidated.

- This adjustment has a huge impact on market makers (MM), as they usually rely on high leverage and large positions to maintain market liquidity and earn spread profits.

2. **MM long positions are actively liquidated**

- Market makers usually hold both spot and contract positions simultaneously to hedge risks and provide liquidity. Assuming they hold long positions (bullish contracts), after the rule change:

- If the position exceeds the new limit, or the leverage ratio cannot support the existing position, the system will force liquidation.

- Liquidating long positions means selling in the contract market, thereby depressing contract prices.

3. **Spot and contract price gap explodes high**

- Typically, spot prices and contract prices maintain a certain correlation through arbitrage. But when a large number of long positions are liquidated:

- Contract prices rapidly decline due to increased selling pressure.

- Spot prices may not have temporarily kept pace with the decline in contract prices, leading to spot prices > contract prices, resulting in a widening price gap (exploding high). This price gap anomaly is usually temporary, as the market reacts quickly.

4. **Robot arbitrage exacerbates the decline**

- Trading robots (especially high-frequency trading algorithms) capture these price gap opportunities for arbitrage:

- Arbitrage strategy: Buy low in the contract market while selling in the spot market, profiting when the price gap converges.

- Result: Robots sell massively in the spot market, further increasing selling pressure in the spot market, leading to a decline in spot prices.

5. **Spot prices are smashed down**

- MM liquidating long positions depresses contract prices.

- Robot arbitrage selling depresses spot prices.

- The combination of these two forces creates a vicious cycle, market sentiment may turn to panic, retail investors also begin to sell, ultimately leading to a crash.

**Overall mechanism summary**

Rule changes → restricted MM's high leverage and large positions → forced liquidation of long positions → decline in contract prices.

Price gap explodes high → robots arbitrage → increase in spot selling → spot prices crash.

Wintermute sells → possibly for hedging, reducing positions, or trend-following, further exacerbating the decline.

**The core reason for the crash is that the rule change breaks the original market balance:**

MM forced liquidation triggers a chain reaction, robots amplify the price gap arbitrage effect, and market panic and selling sentiment accumulate.