Degen Digest: April 2, 2025
Explore the $ACT liquidation cascade, market maker struggles, and ETH/BTC anomalies in our latest crypto market analysis.
Apr 02, 2025
TL;DR
- Massive liquidations on Binance Futures saw $ACT's Open Interest crash from $90M to $23M in a single minute, triggering cascading effects across multiple altcoins
- Market Makers are struggling with declining liquidity, causing recent Binance TGE tokens to show pump-and-dump patterns with minimal initial price support
- ETH/BTC ratio approaches historic lows despite a whale's significant long position accumulation on Bitfinex, breaking from previous bull market patterns
- Market sentiment: Extreme caution advised as diminishing liquidity creates unpredictable conditions where even established whales and MMs face losses
1. $ACT Liquidations and the Ripple Effect on Altcoins
On April 1st, several trading pairs on Binance Futures experienced dramatic price drops within a single one-minute candle. Most notably, $ACT saw its Open Interest collapse from $90M to just $23M during this brief window.
Initial speculation centered around Wintermute (the primary Market Maker for $ACT) potentially dumping holdings. However, further investigation points to a different cause: Binance suddenly adjusted the leverage and Maintenance Margin Ratio (MMR) requirements for $ACT futures pairs. This unexpected change triggered a cascade of liquidations for large position holders who couldn't adapt quickly enough, forcing the simultaneous liquidation of numerous long positions across multiple pairs managed by the affected Market Maker accounts.
Binance's official investigation revealed:
- No single entity profited significantly from $ACT short selling
- A small number of VIP and non-VIP customers sold large token quantities in the spot market
- Since $ACT is a token where FDV=MC, Binance had no grounds to prevent such selling activity
The broader context reveals concerning patterns. Binance has been reducing leverage limits and maximum position sizes across numerous futures contracts with unprecedented frequency. They've also imposed direct sanctions against Market Makers in pairs like $GPS where unusual market behaviors have occurred.
This situation stems from progressively decreasing market liquidity. Market analysis suggests the MM that aggressively sold $GPS had previously attempted to drive up prices during the $SHELL market-making process but found no buyers, resulting in losses. For $GPS, they adapted by:
- Continuously shorting the futures market
- Exclusively placing sell orders in the spot market
- Creating abnormal Open Interest patterns (OI showed upward trends during price declines)
2. The New Playbook for Binance Token Listings
Other Binance TGE tokens display similar patterns. Market Makers now follow a predictable strategy:
- Closely monitor Binance's regulatory posture
- Engineer slight price increases immediately post-listing
- Quickly pivot to generating profits through shorting and spot selling
This represents a shift from previous months when initial market caps after TGEs were excessively high, making price drops inevitable. Now, even tokens with lower initial market caps trend downward due to deteriorating liquidity conditions.
The sudden crashes of $LEVER and $MASK within a single day provide further evidence of a Market Maker (reportedly a company starting with "D") adjusting their entire portfolio. This MM appears to be exiting positions across all tokens they were supporting. The velocity of $MASK's decline from its peak indicates they failed to profit from long positions and are now executing a pump-and-dump strategy—using short positions to offset losses from selling large token quantities in the spot market.
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While no MM has been publicly identified as liquidated from yesterday's events, the market situation clearly demonstrates that even Market Makers themselves are suffering significant losses in the current environment.
3. ETH/BTC Ratio: Breaking Historical Patterns
The ETH/BTC ratio is approaching historic lows, a situation closely monitored by crypto analysts. A major point of interest has been a whale accumulating substantial ETH/BTC long positions on Bitfinex. Many investors anticipated that once this whale began realizing profits, it would trigger Ethereum's rise—a pattern observed in previous market cycles.
Historically, when this whale began to take profits on their ETH/BTC long positions, it coincided with either the middle or beginning of a bull market. This led many to purchase $ETH months ago expecting history to repeat. However, current conditions differ significantly:
- $ETH has transitioned into a long-term downtrend
- $BTC maintains a long-term uptrend but faces new risks with $MSTR exposure
- Market liquidity has fundamentally changed the playing field
While historical patterns provide valuable guidance, market participants must recognize when unprecedented situations emerge. The perspective of the whale accumulating this massive position remains unknown, and assuming identical outcomes will repeat represents limited thinking.
The chart below shows a notorious altcoin from a Korean exchange that rose steadily for weeks before collapsing to zero in a single day—a pattern familiar to those who have witnessed honeypot/rug scenarios in the memecoin space.
The similarities with the ETHBTCLONGS chart are notable. This isn't to suggest $ETH is headed to zero, but rather highlights that even consistently successful whales can eventually misjudge the market, especially when fundamental conditions have changed and Market Makers themselves are struggling to maintain profitability.
Conclusion
Current market conditions signal extreme danger that demands a cautious approach. With declining liquidity creating unpredictable movements, investors should prioritize capital preservation over conviction trades. The safest strategy in this environment is maintaining flexibility and avoiding overexposure to any single position or narrative, regardless of how reliable it may have been in previous market cycles.
For more insights on market dynamics and trading strategies, check out our complete guide to crypto trading strategies and learn how to identify potential market reversals before they happen.
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