Collection of Opinions: Tariffs, Whales, Market Makers, Who is the Culprit Behind Today's Cryptocurrency Market Crash?

The original text is from Odaily Planet Daily Asher

This morning, BTC briefly dropped over 13%, hitting a low of $102,000, currently reported at $112,000. ETH once plummeted over 17%, while XRP and DOGE fell more than 30%. For more market-related content, see “A Night of Terrifying Plunge: A Record $19.1 Billion Liquidation in a Single Day, Wealth in Frenzy”, “In the Great Crash, Who Made Hundreds of Millions by 'Licking Blood Off the Blade'? What Opportunities for Sudden Wealth Are Within Reach?” and “The Whale Stabbing Battle Behind the Largest Liquidation Day in Crypto History: The Bears Feast, Then Leave with Their Knives”.

Although the market generally believes that Trump's tariff remarks have disturbed the sentiment in the crypto market, the short-term plunge of altcoins far exceeded expectations. What exactly triggered this sudden collective drop of altcoins? Here are various analyses and viewpoints compiled by Odaily Planet Daily.

Crypto KOL Phyrex: The plunge may be due to Trump's tariff policy on China

According to crypto KOL Phyrex's post on platform X, the market crash today should be unquestionable, entirely caused by Trump's tariffs on China. The market had already assumed that the relationship between China and the U.S. was not very friendly, but the prolonged tariff timeline still brought about an ostrich effect. However, Trump's tariff actions on Chinese exports directly tore apart a weak link in the tariffs.

Since February last year, any tariff issues involving China have led to market declines, and this time is no exception. However, I always felt that the relationship between China and the U.S. would not escalate to a very tense level. The last 125% tariff also ended under negotiations between the two countries, so I personally do not believe that the U.S.-China relationship is reversing the market trend. But now the market is indeed somewhat panicked, which is unavoidable. I don't know how long it will take to get through this situation, and the panic may not have ended yet.

Santiment: The surge in discussions about new U.S.-China tariff concerns is the main factor for this morning's drop

On-chain data platform Santiment stated that the plunge this morning may have been triggered by heightened market panic due to renewed tensions in U.S.-China trade relations, with crypto assets exhibiting stronger risk asset characteristics amid geopolitical risks.

In the short term, U.S.-China negotiations will remain the core of trade decisions between the two countries. If negotiations between Trump and China make progress and bring good news, retail sentiment towards cryptocurrencies will suddenly improve; if relations further deteriorate, Bitcoin may drop below $100,000.

Crypto KOL Vida: The massive liquidation event may stem from the forced liquidation of USDE arbitrageurs' positions

Crypto KOL Vida posted on platform X that this massive liquidation event is speculated to have occurred in a low liquidity environment with a sharp market decline, with the specific chain reaction roughly as follows:

First, the circular borrowing positions of USDE arbitrageurs were forcibly liquidated, leading to a drop in USDE prices; next, the value of USDE as collateral for unified accounts decreased, weakening its collateral capacity; further triggering more market maker positions using USDE as margin to be forcibly liquidated; subsequently, earn-type assets like BNSOL and WBETH also hit liquidation thresholds; although these assets had high collateral rates, their prices were mainly supported by the order book, and at that time, the market lacked buy support, causing the peg mechanism to fail; resulting in a rapid price collapse, with the liquidation chain reaction further expanding.

Overall, it is very likely that some market makers using unified accounts also faced liquidation, which explains why many small tokens experienced extreme price fluctuations at that time.

Arthur Hayes: Large CEX's automatic liquidation of cross-margin collateral triggered the plunge of altcoins

BitMEX co-founder Arthur Hayes stated that the automatic liquidation of cross-margin collateral by large centralized exchanges (CEX) is the reason for the significant drop in many altcoins during this price decline. Additionally, he mentioned that many high-quality altcoins are unlikely to experience such levels of price drops in the short term.

Primitive Ventures Founder: The market crash may be caused by a large institution's massive liquidation on Binance

Primitive Ventures founder Dovey posted on platform X, speculating that this market crash is due to a large institution (possibly a trading company using cross-margin) experiencing massive liquidation on Binance. Although further analysis is needed, it appears that the price of USDe on Binance once dropped to $0.6, while prices on other trading platforms remained relatively stable. Additionally, there was a huge disparity in trading volume between tokens listed on Binance and those not listed.

Crypto KOL Bugsbunny: The crypto market crash this morning is due to issues with active market makers

Crypto KOL Bugsbunny posted on platform X that market makers have limited funds, and these limited funds will differentiate between various projects, with Tier 0, Tier 1, Tier 2, Tier 3, and Tier 4, providing different levels of liquidity.

The most funds are allocated to Tier 0 and Tier 1 projects, while Tier 2 and Tier 3 projects receive only incidental support. After the collapse of Jump, many projects fell into the hands of active market makers, who are essentially wild market makers lacking sufficient hedging awareness, with almost no thorough consideration for tail hedging, only thinking about normal market conditions and not extreme scenarios.

So at the moment Trump confirmed the reimplementation of tariffs, there wasn't enough capital to support all projects. Thus, only the larger projects could be guaranteed not to have issues. The funds originally allocated to support smaller projects might even be redirected to larger Tier 0 and Tier 1 projects. This leads to a situation where, when there is a massive sell-off or pressure in the market, market makers simply do not have enough funds to place orders, resulting in a lack of counterparties, and prices plummeting, as seen with IOTX, which nearly went to zero.

Crypto KOL Huanbalongwang: The market crash may be due to the combined effects of USDe circular lending, margin leverage doubling, and Trump's trade war, causing heavy losses for market makers

Crypto KOL Huanbalongwang posted on platform X that this market crash may be due to a 12% subsidy on USDe, with many market users engaging in USDe circular lending. Affected by Trump's trade war, USDe was subjected to premium attacks, leading to the liquidation of USDe circular lending and further declines in USDe. Additionally, some whales and market makers used USDe as margin for contracts, and due to the de-pegging and discounting of USDe, leverage inexplicably doubled, ultimately resulting in even 1x long positions being liquidated. This further triggered a chain reaction, with small altcoin contract prices rapidly falling, USDe plummeting quickly, even doubling its decline, leading to significant losses for market makers.

Crypto KOL Big Orange: WBETH, BNSOL, and other contract margins should not reference spot trading pair prices; the cascading drop could have been avoided

According to crypto KOL Big Orange's community post, he previously mentioned the risk control issues with WBETH during a live options session on Binance Square. His main point is: since Binance has allowed WBETH and BNSOL to be used as contract margins, it should not reference the spot trading pair price index and could directly fix the exchange rate at 1:1.

The reason is simple—these two assets are essentially internal assets of the Binance ecosystem, which Binance can mint and burn. Once issues arise, it only needs to go through a redemption period to balance the risks. The "cascading" drop last night could have been completely avoided.

Crypto KOL Forgiven: This plunge may be a premeditated attack targeting Binance's main market makers

Crypto KOL Forgiven posted on platform X that this plunge may be a premeditated attack targeting Binance and a major market maker on Binance, with the Achilles' heel being the issue of unified account contract margins on Binance. In addition to normal U-based and coin-based margins, Binance has also opened up options for POS derivatives and wealth management stablecoins to be used as unified margins.

The three margin targets most severely attacked were USDE, Wbeth, and BnSol. These three targets, as unified account margins, had their liquidation prices determined by Binance's own spot market prices, rather than being rigidly pegged. In contrast, Bfusd, also used as unified margin, is rigidly pegged, and the on-chain Aave price for Usde is fixed at 1:1, which did not result in large-scale liquidation.

In a situation where both Bitcoin and altcoins were declining, contract traders were likely to be losing money, and with coin-based margins declining further due to the additional de-pegging of the base currency, USDe dropped to a low of 0.65, wbeth to a low of 0.2, and Bnsol to a low of 0.13. Even hedged positions would be unable to maintain their positions due to the significant shrinkage of margins. This triggered a chain reaction of liquidations across most contract positions on Binance and these three targets.

In addition to general contract traders, market makers using these three targets as margins would be forced to liquidate all their positions and also liquidate their own margins. Besides margin liquidations, due to Binance's launch of a 12% wealth management activity for USDE, many stablecoin holders used Binance's lending products for USDE circular lending, exacerbating the damage from this attack.

Crypto KOL Huangdao: The crash may have been caused by a bug in Binance's market-making mechanism that brought down the entire crypto market

Crypto KOL Huangdao posted on platform X that the culprit behind today's market crash may be a bug in Binance's market-making mechanism, as almost all altcoins on Binance experienced abnormal drops after 5:18 AM, causing prices on other exchanges to follow suit. Comparing SUI on Binance and COINBASE, before 5:17 AM, prices were consistently around $2; after 5:18 AM, COINBASE began to rebound, while Binance started to experience abnormal drops, with a maximum drop of 82%, while COINBASE's maximum drop was only 38%, and there were also unusually large fluctuations in subsequent price spikes.

What further illustrates the issue is that the PAXG gold contract also began to experience abnormal drops at 5:18 AM, while the gold contract was in a closed state during this period and should not have fluctuated, indicating that Binance's market-making mechanism encountered an anomaly at 5:18 AM, leading to abnormal drops across all varieties.

Yili Hua: The crash was caused by multiple factors, with meme frenzy draining market liquidity and suffocating altcoins

Liquid Capital (formerly LD Capital) founder Yili Hua posted on platform X that this is the first time he has completely liquidated since calling out ETH, stating several reasons: first, Bitcoin reached a new high resistance level and needed to pull back without major positive breakthroughs; second, U.S. stocks reached new highs, and AI and semiconductor companies engaged in financial games that cannot sustain support; third, Japan is about to change its prime minister, increasing interest rate risks and continuously rising rates; fourth, altcoins in the crypto circle have been in a prolonged decline, with the meme frenzy draining liquidity.