Cryptocurrencies are suppressed by multiple factors, and the collective waterfall market of altcoins encounters a liquidity crisis

By: Babywhale, Foresight News

At noon yesterday, Beijing time, Bitcoin fell to 26,000 USDT and Ethereum fell to 1,800 USDT. Although the prices of Bitcoin and Ethereum fell by only about 3% from their intraday highs, a group of altcoins plummeted collectively at the same time.

Among them, ADA, MATIC, and SOL, which were delisted by Robinhood, all fell by more than 20% in the short term. Yesterday, Robinhood announced that it would delist ADA, MATIC, and SOL on June 28. Prior to this, the US Securities and Exchange Commission (SEC) was targeting Binance and Coinbase. Tokens such as SOL, MATIC and ADA are named in the lawsuit filed as unregistered securities.

However, under the double blow of being identified as a security by the US Securities and Exchange Commission (SEC) and Grayscale's application to withdraw the Filecoin trust product, FIL once fell by more than 30% in the short term. The more popular tokens recently, such as SUI, BLUR, etc., have also not been spared.

The short-term collective waterfall in the market also made the contract market miserable. According to data from Coinglass, in this slump, the liquidation volume of the entire network exceeded 230 million US dollars, while the liquidation volume of Bitcoin and Ethereum only accounted for 1/4. liquidation.

What caused the crash

Lack of Liquidity

This trend of differentiation between Bitcoin, Ethereum and other tokens may be related to the impact of regulation and the lack of market liquidity.

Although the extreme short-term impact of the SEC’s lawsuit on Binance and Changpeng Zhao has been eliminated, the long-term uncertainty it has generated still makes a large number of investors choose to temporarily leave the market to avoid risks. In this decline, almost all the tokens defined as securities by the SEC plummeted by more than 20% in a few minutes, and this is likely to be caused by the panic caused by the decline of Bitcoin and the uncertainty of the regulatory outlook of these tokens themselves. of. Although the market didn't react much when the news that a large number of tokens were defined as securities was just beginning to ferment, once there is a change in the market, it is likely to trigger a chain reaction.

The lack of liquidity is affected by several reasons.

The first is still regulatory reasons. Cryptocurrency market makers Jane Street and Jump Trading announced their withdrawal from the U.S. market a month ago. Although they can still make markets on exchanges in other countries or regions, such a large number of market makers from U.S. cryptocurrency exchanges There will inevitably be a liquidity vacuum in the process of withdrawing and completing the docking with other exchanges. In addition, other market makers may also shrink or even withdraw from the cryptocurrency market-making business due to concerns about regulatory uncertainty. This makes the trading depth in the exchange seriously affected.

On the other hand, although the cryptocurrency market has outperformed traditional risk assets such as U.S. stocks at the beginning of the year, the performance of cryptocurrencies has obviously lagged behind the U.S. stock market since May. Withdraw from money markets and start investing in traditional financial markets where expectations are clearer and more liquid.

Macro perspective

From a more macro perspective, although the United States has passed the new debt ceiling bill to avoid the default of US debt, it also means that the newly issued bonds will draw trillions of dollars of liquidity from the market. Although some analysts pointed out that the liquidity drawn by U.S. debt may come from funds invested in monetary fund products, this may have a greater impact on sentiment and expectations for the cryptocurrency market, which is extremely dependent on liquidity.

summary

Although the current cryptocurrency market is being suppressed by multiple factors, there is still no rush to "sentence the death penalty". As many exchanges will successively obtain operating licenses in Hong Kong, the market may usher in long-lost incremental funds in the second half of the year. In addition, the current round of US stock market may gradually return to rationality as the concept of AI cools down. At that time, the cryptocurrency market with cheap chips may be a good choice for funds temporarily withdrawing from US stocks.