In-depth Analysis of the ACT Flash Crash Incident: Liquidity Crisis Triggered by Binance's Rule Adjustment

Binance announced an adjustment to the position limits for ACT on March 31, and on April 1 at 15:32, Binance issued another announcement, limiting the maximum position for 1x leverage to $4.5 million, with the adjustment taking effect at 18:30, giving users less than 3 hours to react.

Due to Binance's adjustment of the leverage position limit for ACT, some market makers' positions exceeded the new limit, and these excess positions were directly liquidated at market price. Market liquidation led to a surge of sell orders flooding the market, causing a sharp drop in prices.

After the contract price collapsed due to market liquidation, a huge price difference emerged between the contract and the spot market. The existence of this price difference also dragged down the spot market, further exacerbating the price decline.

On April 1, 2025, the ACT token experienced a sudden flash crash on the Binance exchange, plummeting over 50% within 30 minutes, along with multiple meme tokens (such as DEXE, TST, etc.) also crashing. The core trigger of this storm was Binance's urgent adjustment of perpetual contract rules, compounded by market liquidity fragility and market maker sell-offs, creating a 'contract-spot cascading effect.'

As an industry leader, Binance's actions sparked dissatisfaction and skepticism in the market. Users expressed concerns over the transparency and reasonableness of its rule adjustments, which could impact Binance's reputation and market share.

After the incident, there was considerable criticism in the market:

Firstly, Binance did not preemptively assess the scale of excess positions nor did it notify large holding institutions (such as market makers like Wintermute) to adjust their strategies, leaving the market unprepared. Similar issues had previously sparked controversy when Binance adjusted GRT and ZEC contract parameters in 2023, yet there was no improvement in risk buffer mechanisms.

Secondly, platforms like Binance, in pursuit of fee revenue, allowed the listing of MEME coins with no actual value and high market control, creating a vicious cycle of 'listing equals peak, peak equals zero.'

Thirdly, there is a regulatory vacuum, where project parties evade responsibility under the guise of decentralization, leaving investors with no recourse for their rights after a crash, with exchanges becoming the sole accountable entity.

This incident also exposed issues in the cryptocurrency market regarding rule adjustments and risk management. Compliance is urgently needed, and standards for reviewing token economic models (such as position concentration disclosure and lock-up mechanisms) must be established to reduce zero-cost harvesting phenomena.

In summary: The ACT flash crash incident is a typical case of the resonance between exchange policy errors, market structure fragility, and capital manipulation. It reveals a harsh reality: in the unregulated and unaccountable cryptocurrency market, retail investors are always the ultimate bearers of systemic risks. Only through exchanges improving risk control, investors adhering to discipline, and the industry promoting compliance can we avoid the repeated ravages of such hurricanes.

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