WOO X Research: Did the bull really leave after a night of collapse?

This liquidation is the second largest in history, far exceeding the “312” tragedy.

Written by WOO

On December 5th, BTC officially broke through the $100,000 mark, indicating the start of a new wave of encryption. Just as the market sentiment was boiling, on December 10th, it suddenly experienced a sharp fall. BTC fell from $100,000 to a low of $94,100 within six hours, with a fall of 6%.

Meanwhile, excluding the AltCoins of BTC and ETH, facing a more severe decline, up to 14%.

According to Coinglass data, the total Get Liquidated amount reached 1.734 billion USD within 24 hours, with a total of 580,000 people getting liquidated. This far exceeds the scale of the Bitcoin’s big dump on March 12, 2020, when 50% of the people got liquidated, which was only 100,000 people.

The suddenness of this decline caught us off guard. Although BTC later rebounded to the $97,000 level, the Position that was forcibly Close Positioned will never come back. Is this drop just a normal pullback? Or has this cycle reached its peak? Let WOO X Research show everyone the reasons and future prospects behind the big dump!

Source: Coinglass

The altcoin market is bullish, with massive leverage in place.

On November 14, WOO X Research published an article, indicating that the prediction market cycle was approaching the “Altcoin eruption eve”, with BTC’s market dominance at about 61% at that time. In less than a month, this data has dropped to 55%, marking the current market cycle as the Altcoin eruption phase.

Meanwhile, the total market cap has surpassed 1 trillion dollars, with a growth rate of 55% in the past month.

Zone rotation to altcoin pump is not the main cause of the decline, but the excessively optimistic sentiment has led to a large amount of leverage in the market.

ETH and SOL, representing altcoin currencies, have both reached historical highs in contract Holdings, pumping in sync with Token prices. This phenomenon can be interpreted as: encryption users do not actually own the currency, but go long with leverage, with higher Holdings indicating stronger bullish sentiment.

Tonight, the open interest of ETH reached $27 billion, a month ago it was $17 billion, a nearly 60% increase in pump within a month. The price of the coin has not kept up with the huge increase in open interest, indicating strong speculative sentiment.

The example of ETH is just a microcosm, and the changes in the holdings of most Altcoins are even more intense, such as Doge, Xrp, Pepe, etc. Altcoins can be regarded as ‘leveraged’ BTC in themselves, and with the leverage feature of Contract Trading, there is an excessive amount of leverage in the current market, which needs to be cleared before the market can move forward.

Source: Coinglass

In addition, from the perspective of funding rate, an overheated state can also be observed before the big dump.

Review the relationship between the trend of BTC and the funding rate of AltCoins in the past month. During the process of BTC rising from $70,000 to $100,000, the funding rate of AltCoins did not show a significant increase, with annualized interest rates mostly ranging from 10% to 30%, and only a few days of intermittent and sporadic coins exceeding 100%.

From the chart below, it can be observed that the Altcoin market has shown a consecutive number of days after December 4th, and most Altcoin funding rates have skyrocketed, mostly falling in the range of 60% - 100%.

The resonance pump of open interest and funding rate once again confirms the large amount of leverage in the current market, and the main reason for the decline is simple: the chain reaction of high leverage liquidation.

Source: Coinglass

External Event: Hawkish Remarks + Christmas Holiday

The above-mentioned is that there is a large amount of leverage in the encryption market, and as for external events, the recent hawkish remarks released by the Federal Reserve have been analyzed by analysts at Australia’s largest banking group, Macquarie Bank, who pointed out that the recent slowdown in US inflation, lower than expected unemployment rate since September, and the optimistic performance of the US financial markets are the main factors driving the Fed towards a more hawkish stance.

In addition, with the CPI and unemployment data to be released on December 11th and 12th, as well as the upcoming Christmas holiday, in the face of many uncertainties, it is understandable that European and American investors have a demand for profit-taking and hedging.

Summary: Bull market is still here, liquidation is normal

This time, we are more inclined to clear leverage, and the outlook for the 2025 Bull Market remains unchanged.

Whenever it comes to the crypto world, speculation is always inseparable. High leverage is the emotional indicator of this market. Most excessively high emotions do not necessarily mean pushing the market forward, but rather the need for new capital injection into the market. Returning to the essence of price pump is the law of supply and demand. It can be observed that various institutions’ interest in both BTC and ETH coins is still unabated. Spot ETF continues to see net inflows, with ETH Ethereum seeing continuous net inflows for 11 days, reaching a historical high on November 30, with single-day net inflows exceeding BTC Spot ETF.

Source: sosovaule