Encryption market burst 40 billion, experience and lessons under extreme market conditions

Thinking back to the "312" last year, I still remember it vividly. After a year, everyone seems to be talking about it after dinner, and even most people have forgotten the details of the incident, especially for those who are new to the encryption market. Said that it may just exist like a "rumor in the rivers and lakes".

But on the eve of "520", an online Valentine's Day, an unexpected "raid" shocked the encryption market. On the night of May 19, Bitcoin fell all the way, falling below the support level one after another, and went straight to below $30,000. It fell by more than 30% within an hour, a new low since the end of January this year; Ethereum fell below the $2,000 mark, a drop of more than 40%; Dogecoin, which was previously hot, also fell below $0.3, almost cut in half.

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1. Sword of Damocles: Anticipation of interest rate hikes

Affected by the epidemic, the U.S. government has adopted multiple rounds of economic subsidy policies, and the transitional subsidies have suppressed employment growth, resulting in the U.S. non-agricultural data in April falling short of expectations. CPI significantly exceeded market expectations of 3.6%, an increase of 4.2%, the largest increase since the second half of 2009.

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2. The market is overheated: the "zoo" forgot to lock the door

This year, under the influence of the world's richest man, Elon Musk, Dogecoin won an astonishing surge, and in May, as another animal coin SHIB (Shiba Inucoin) once again passed Musk's hot spot again in a short period of time The sharp rise in the market has aroused widespread concern in the market. Some savvy speculators immediately followed suit, launching cryptocurrencies such as husky coins, orangutan coins, pig coins, and various other animals.

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3. Uninterrupted regulatory signals

On the one hand, domestic places such as Beijing, Inner Mongolia, and Xinjiang have begun to impose high-pressure supervision on the mining industry. Because mining itself is an industry that consumes a lot of electricity, all provinces in China have gradually imposed strict requirements on carbon emissions, and some provinces that use thermal power have therefore begun to restrict it.

In addition, on May 18, three departments, including the Mutual Finance Association, announced that financial payment institutions are not allowed to conduct business related to virtual currency, and are not allowed to directly or indirectly provide customers with other services related to virtual currency. As soon as this news came out, it became the last straw that broke the camel's back, and the entire market immediately began a brutal decline.

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1. DeFi brings a series of explosions

Looking at the previous market, it is actually difficult to reach such a high amount of liquidation, but because of the rapid development of DeFi in the past year, a number of encrypted products for mortgage loans have been born, and the amount of locked positions in the DeFi market has also hit new highs one after another. From less than 1 billion US dollars at the beginning of last year, it has increased to 110 billion US dollars, an astounding increase.

According to OKlink data, on May 19 alone, the total locked-up volume of the Ethereum DeFi ecosystem decreased by US$15 billion. If calculated from US$110 billion on May 11, the value of the total locked-up assets shrank by 30%.

When we delved into the reasons behind it, the reason for the large amount of liquidated warehouse receipts was due to the rapid decline of the market on the one hand, and the liquidation of these DeFi products on the other hand. As of May 20, DeBank data showed that the 24-hour liquidation value of mainstream DeFi lending agreements exceeded $600 million, the first time since February 22 last year.

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2. Contract players failed to cover their positions in time

On the other hand, we know that since BitMEX, the encryption market has been full of highly leveraged contract products, and the sharp rise and fall of the encryption market has also made some players unable to control their hands, often choosing the method of "testing on the edge of danger". When the next extreme market comes, they will be forced to "stop the loss when the position is liquidated".

However, in addition to the wrong judgment of the player’s direction, another factor is that every time extreme market conditions appear, some trading platforms will experience “downtime” in their replenishment paths, resulting in some orders that could have been accepted for work also becoming “turtles in the urn”.

Another way to solve this problem is to use the Ouyi OKEx unified account that has been launched for half a year. Through the unified account, cross-currency margin settlement can be conveniently carried out, thereby saving costs and reducing transaction friction. You must know that converting other types of encrypted assets into the target you need will inevitably cost more to complete the operation. After all, the slippage of the instant transaction (due to the capacity of pending orders in the market, the price of the order is different from the actual transaction price. ) is inevitable.

In addition, when such an extreme market appears, those few seconds are really the speed of life and death, so the most obvious advantage of a trading method like a unified account is to shorten the processing time of extreme transactions and simplify the operation steps, which is to a certain extent In fact, it can avoid the liquidation caused by the untimely adjustment of positions.

Of course, the use of a unified account is only the perfection of the tool. If it is a completely high-leverage method, no tool can solve the essential problem, but only reduce the probability.

Whether it was "312" last year or "519" this year, when the market is overheated and non-professionals run rampant, the market will always hit the head to warn everyone to be in awe of the market. I think this is probably a permanent problem After all, the market is irrational most of the time, and all we can do is to recognize the reality, stay awake, and use tools well.

*Blockchain Knight reminds readers to guard against investment risks. This article is for learning and understanding only, and does not constitute investment advice.

*Blockchain Knight reminds readers to guard against investment risks. This article is for learning and understanding only, and does not constitute investment advice.