Degen Digest: February 5, 2025
Discover how tariff wars, Fed policy shifts, and meme coin volatility are shaping the crypto market, plus key strategies to stay ahead in this week’s Degen Digest.
Feb 05, 2025
TL;DR
- $ETH crashes from $4,100 → $2,080, liquidating most traders as BTC dominance hits 64.3%.
- Tariff war & Fed policy shifts trigger $2B+ in crypto liquidations.
- DEX pump & dumps intensify—celebrity-backed meme coins spike & crash fast.
- Strategy: Stay cautious, shorten trades, avoid FOMO on hyped tokens.
- Rebound soon? Watch for Bitcoin dominance drop to fuel altcoin recovery.
The Great Downfall: Tariff Wars and Interest Rate Shifts Shake the Crypto Market
Over the past few days, heightened tariff pressures from President Trump on neighboring countries and a shift in the White House’s stance on Federal Reserve rate cuts have triggered a sharp downturn across financial markets. This shift in monetary policy, which now supports a slower rate-cut trajectory, has not only impacted NASDAQ but also sent shockwaves through risk assets like cryptocurrencies.
$ETH Takes a Bigger Hit Than $BTC
The liquidation volume reported by Coinglass initially estimated a staggering $2 billion in liquidations, but according to Bybit CEO Ben Zhou, the actual figure could be four to five times higher due to API limitations on Coinglass. Bybit alone recorded $2.1 billion in liquidations within 24 hours.
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Ethereum ($ETH) experienced one of its fastest and most severe price declines in years. After reaching a seasonal high of $4,100 in December, it plummeted to $2,080 on Binance Futures, erasing nearly half of its value in under two months. This crash left most leveraged Ethereum traders liquidated, regardless of their leverage ratio.
Meanwhile, Bitcoin ($BTC) has continuously pushed to new all-time highs, recovering from all dips, reinforcing the notion that we remain in a bull market. The ETH/BTC ratio has been in a sustained downtrend for months, suggesting a potential reversal soon. Market participants, particularly WLFI, have been accumulating Ethereum, fueling speculation that an altcoin season could be imminent.
Despite these bullish narratives, many traders were caught off guard, leveraging Ethereum at $3,000+ levels, only to face massive liquidations.
Will This Drop Lead to a Rebound?
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The Bitcoin Dominance Index (BTCDOMUSDT) launched by Binance in 2021 has been on a five-year uptrend, recently hitting a four-year high of 64.3%. Some traders argue that this sharp decline in crypto prices is merely a setup for a larger rally, as it removes significant short-term selling pressure from futures markets.
If Bitcoin dominance starts to decline, Ethereum could experience a strong rebound. However, there is growing skepticism about whether Bitcoin dominance has any reason to fall in the near term. Additionally, with expectations that tariff wars between the U.S., China, and Europe could escalate, market uncertainty is likely to persist.
For now, a cautious approach is advisable until macroeconomic conditions stabilize.
Pump and Dump Cycles on DEXs Are Becoming More Extreme
Due to the current state of centralized exchange (CEX) markets, most altcoins experience sharp declines after being listed, whether on the spot or futures market.
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While some altcoins initially perform well post-listing, many plunge immediately, discouraging traders from holding long positions on CEXs. As a result, a growing number of crypto traders (CTs) are shifting capital to decentralized exchanges (DEXs), particularly Solana-based DEXs, which have seen a significant spike in liquidity over the past few weeks.
However, DEX trading is not without its risks. A prime example is $MELANIA, which surged to a $2B market cap immediately after launch, primarily fueled by speculation around Trump-related tokens. Despite its initial hype, $MELANIA crashed violently, following an extreme pump and dump pattern.
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To put this into perspective:
- $MELANIA’s fully diluted valuation (FDV) was 7x its market cap, meaning its tokenomics were already fragile.
- It surpassed long-established tokens like $SPX and $FARTCOIN in market cap within hours of launching, driven purely by celebrity hype.
- Historical patterns with celebrity-backed tokens like $MOTHER and $DADDY suggest they tend to pump for a few days before crashing gradually, but recent cases show even more aggressive dump cycles.
New DEX Pump and Dumps Are More Rapid and Ruthless
Recent meme coins such as $ALON, $PASTERNAK, $JELLYJELLY, and $VVV have reached valuations of $250M+ (with $PASTERNAK peaking at $84M) in record time, only to experience slow rug pulls shortly after.
Unlike previous cycles, these tokens:
- Skyrocket to peak valuations within an extremely short time frame, rather than gradually building up market cap.
- Undergo abrupt liquidity drains, leading to faster cycles and more severe losses for retail traders.
- Even whales who attempted to buy dips suffered significant losses, as seen in this top whale’s liquidation on $ALON:Whale liquidation on $ALON.
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These patterns indicate that liquidity is cycling through meme coins much faster, making it even more difficult for retail traders to profit. With $TRUMP launching a token, more celebrity-backed coins are inevitable, but traders need to develop better strategies to navigate these volatile conditions.
Key Takeaways & Strategy Recommendations
- The market is currently extremely difficult to navigate.
- The ongoing tariff war between the U.S., China, and Europe adds macro uncertainty.
- Until the tariff war fears subside, a cautious, defensive approach is recommended.
- If trading altcoins, shorten trade durations to minimize risk.
- Avoid FOMO on celebrity-backed DEX tokens.
- Many recent launches have resulted in severe pump and dumps.
- Study previous token cycles to anticipate potential price movements before making a trade.
- Stay updated on DEX trading trends through on-chain analytics tools (learn more in our guide: Advanced Onchain Analytics Tools).
For more in-depth research, check out our latest insights on DEX trading strategies and Solana ecosystem trends.
Stay ahead of the market by following Degen Digest every week.
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