Last night, the crypto market presented a stark contrast. Bitcoin and Ethereum rebounded quietly, reaching $85,000 and $1,900, respectively, while altcoins collectively plummeted, with the ACT token losing 60% of its value. Other small-cap coins were not spared either, as if they all fell victim to a curse on 'April Fool's Day.' What exactly happened?
Yesterday, BTC and ETH rose steadily, while altcoins faced a 'Waterloo.' On April 1st, the ACT token dropped from $0.19 to $0.08 in a matter of minutes, a decline of 58%, evaporating $96 million in market value. Other altcoins such as sudeng (HIPPO), CZ'S Dog (BROCCOLI), TST, and MASK also suffered, with the altcoin market in mourning.
The collapse of ACT stemmed from a rule adjustment at Binance. On April 1st at 10:30 UTC, Binance updated the leverage multiples and position limits for the ACT/USDT perpetual contract with the aim of 'controlling risks and preventing excessive speculation.' Specifically, the position limit was reduced from $10 million to $5 million, and leverage multiples were also significantly lowered. This had a huge impact on market makers (MMs) like Wintermute, who typically rely on high leverage and large positions to maintain market liquidity.
After the rule adjustment, over-leveraged long positions were forced to liquidate. Liquidation means selling in the contract market, which directly pressured the contract prices down. Blockchain analysis tool Lookonchain revealed that a whale was liquidated at $0.1877, resulting in a loss of $3.79 million, indicating the significant impact of the adjustments.
After the decline in contract prices, spot prices did not follow up in time, leading to a widening spread between the two. Trading robots quickly seized this arbitrage opportunity, buying low in the contract market while selling in the spot market to flatten the spread. As a result, the spot market faced selling pressure, causing ACT prices to drop from $0.19 to $0.08, all within less than an hour.
Binance responded afterward, stating that the crash was triggered by concentrated selling from several large holders: three VIP users sold $514,000 worth of ACT in the spot market, while a non-VIP user transferred in from outside and sold $540,000 worth of tokens. The sell-off triggered forced liquidations in the futures contracts, creating a chain reaction in the market. Binance emphasized that no 'manipulative behavior' was found and has lowered the leverage multiples for ACT/USDT contracts to mitigate risks. However, this explanation failed to quell community dissatisfaction, and the ACT team stated on platform X that they 'fully understand the situation' and are working with relevant parties to formulate a response plan.
As a market maker affiliated with Binance, Wintermute has been thrust into the spotlight. The community speculated that they 'abandoned their positions,' and even suspected it was a hacker attack or bankruptcy liquidation.
User Daniele speculated that Wintermute might be 'washing out' for Trump's World Liberty Financial project, selling off non-compliant assets.
However, Wintermute CEO Evgeny Gaevoy clarified: 'It wasn't us, and I am also interested in the reason for the crash.'
The user later apologized, admitting to misunderstanding Wintermute, and stated that it performed better than competitors in improving liquidity.
The truth is more likely to be the chain reaction of rule adjustments. Wintermute may have been forced to liquidate or reduce hedges due to rule changes, but this was not the main reason for the crash. The core issue is that Binance's rule adjustments broke the market balance, with arbitrage by robots and panic among retail investors amplifying the decline.
Last night, the market showed clear differentiation. Bitcoin and Ethereum rebounded steadily due to institutional funds, policy expectations, and the warming of ETFs, while altcoins collapsed due to lack of market confidence. Currently, at the early stage of Trump's new administration, the market generally expects that his 'America First' policy may lead to tariff adjustments, particularly the tariff policy targeting Chinese goods, which is anticipated to be implemented tomorrow. At this critical juncture, market confidence is already fragile, and investors are filled with worries about macroeconomic uncertainties; any minor disturbance could trigger FUD (fear, uncertainty, and doubt) sentiments.
The altcoin market was the first to be hit. Small-cap coins like ACT already had weak liquidity, and Binance's rule adjustment was just the trigger; the real driving force was the amplified panic of market sentiment. Investors are worried that the implementation of tariffs may slow down the global economy, with risk assets being the first to bear the brunt, while altcoins, as high-volatility assets, became the primary targets for sell-offs. In contrast, Bitcoin and Ethereum showed stronger resilience due to the support of institutional funds and policy expectations.
