Bear? One article sorts out four reasons for this market decline

Author: Scof, ChainCatcher

Edited by: TB, ChainCatcher

Before the endgame of Bybit and Infini being stolen by hackers, the market ushered in a painful blow this morning: As of press time, according to coinglass data, a total of 373,863 people worldwide have been exposed in the past 24 hours, with the total amount of liquidation being $14.05 100 million. Among them, the exchange with the largest liquidation volume is Bybit, which is also a commonly used platform for institutions.

In addition, data from digital asset management company Arca shows that most tokens have lost 30% to 80% of the value since mid-December last year, with Solana losing about $50 billion in the past month.

This article summarizes four reasons for the market plunge for readers' reference.

More plunges in the month after large-scale hacking incidents

Judging from the past market, large-scale hacking incidents usually occur at the bottom of the market, and even lower cases will occur.

For example, Ronin was stolen for US$625 million in March 2022, and Bitcoin then closed negative lines in April, May and June, and the price of Bitcoin fell from US$45,510 to US$19,942;

In March 2023, Euler Finance was hacked for $197 million, and Bitcoin ended its upward trend in the previous few months and entered a six-month consolidation;

In July 2024, the Indian exchange WazirX lost US$235 million. The market, which had been fluctuating in the range for five months, closed negative in the following August, and the price fell from a low of US$64,628 to US$49,000.

The Bybit incident faced this time is the largest theft case in history. Although it successfully resolved the most dangerous run risk, the hackers will need to cash out the stolen ETH or turn it into other currencies, which will be the case for the market. It is a great selling pressure. At the same time, this process will also take away a lot of liquidity of altcoins, and the counterfeit season is unlikely to arrive in the short term.

MSTR switches to convertible bond financing, slowing pace of buying BTC

On February 20, Strategy (formerly MicroStrategy) announced the issuance of US$2 billion convertible priority notes, and disclosed on February 24 that it increased its holdings of 20,356 Bitcoins at an average price of US$97,514.

Previously, MSTR mainly raised funds through stock ATMs (i.e., selling stocks directly in the market), rapidly increased its holdings of Bitcoin, and purchased $16 billion worth of Bitcoin in just a few months.

However, MSTR has recently changed its strategy to use convertible bond (CB) financing, reducing financing costs but declining execution efficiency, meaning it no longer buys Bitcoin at such a fast pace. This change has caused the market to withdraw short-term liquidity, and the liquidity premium is quickly squeezed out, which has the possibility of disappearing, leading to downward pressure on the Bitcoin market.

In addition, CB holders may convert bonds into stocks in the future, resulting in a dilution of MicroStrategy equity. Investors are concerned that the company's long-term purchasing power has declined, thus weakening bullish expectations for Bitcoin.

The unannounced positive news and the negative policies that followed

The positive effects on the policy side are often slow and continuous. Since Trump announced the Bitcoin national strategic reserve plan, the actual actions have not been fulfilled for a long time, and he himself has disappeared in the crypto market for a while, and the market's patience has been constantly eroding.

BitMEX co-founder Arthur Hayes once said that the core problem of government hoarding assets is that they often buy and sell for political interests rather than financial interests, causing policy instability. The market's expectations for Bitcoin strategic reserves have failed, further hitting investors' confidence.

In addition to the delayed actual implementation, the newly issued tariff policies of the Trump administration are undoubtedly adding fuel to the market. According to the latest proposal, Chinese ship operators may pay a fixed fee of $1 million per entry into a U.S. port, or $1,000 per tonne for a ship's net tonnage. According to analysis, this policy will directly cause the cost of shipping on the US line to soar, thereby indirectly causing inflation to continue to rise or remain high, further curbing the expectation of interest rate cuts.

On February 25, at the legislative session on February 24 local time, the South Dakota House Business and Energy Committee decided to postpone the HB 1202 bill to the "41st day" of this legislative session, according to Cointelegraph. However, the state's legislative session only lasted for 40 days, and this action essentially stifled the bill and further hit market sentiment.

In addition, during the consensus meeting, some major market makers said that Memecoin such as TRUMP and LIBRA are absorbing liquidity from more mature cryptocurrencies, and the memecoin fanaticism is a key reason for the downturn in Bitcoin and the altcoin market across the board, which feels like Similar to the downturn in price trend seven years ago.

A bear market has arrived?

Recently, news that Microsoft has removed two data centers has raised concerns about the risk of oversupply of AI infrastructure, and Trump's claim to continue to impose tariffs on Canada and Mexico has jointly hit market confidence. According to 4E monitoring data, major U.S. stock indexes generally performed weakly, with the Dow Jones Industrial Average barely closing up 0.08%, while the S&P 500 fell 0.50%. The collective decline of technology stocks caused the Nasdaq to close 1.21%.

In addition, Steve Cohen, a well-known hedge fund billionaire and founder of Point72, said in a speech in Miami that the Trump administration's policies may lead to significant adjustments to the US stock market. Cohen expects that U.S. economic growth will slow from 2.5% to 1.5% in the second half of 2025, which is "the first time in some time that he feels extremely negative." He pointed out that Trump's tariff policy is essentially a tax that will likely trigger retaliation from international trade, and immigration restrictions will also have a negative impact on labor growth, while the anti-corruption initiative implemented by the Department of Efficiency of the Government (DOGE) is actually austerity policy , the superposition of these factors will have a serious impact on the US economy.

Against the backdrop of the cumulative rise of the S&P 500 index by more than 50% since the beginning of 2023 and the stock price soaring by 800%, the market valuation is currently at a historical high. The holdings of investors such as hedge funds and retail investors have reached their limits, and the downward risks of the market have increased significantly.

Jeff Dorman, chief investment officer at Arca, said: “The weak cryptocurrency market has been going on for eight weeks, with stocks, fixed income and gold not affected at all by any indicators used to explain the weakness, only cryptocurrencies continue to decline. This is largely the case. This is due to the sluggish market sentiment, the failure of various Meme coins, and the lack of funds to support the issuance of new tokens."

Analyst Godbole believes that futures activity will signal a large number of new shorts influx as Monday's bearish bald candlestick charts signal more losses in the future. The cumulative volume increment (CVD) of Binance's futures and spot markets has been negative and has expanded further as prices fall, indicating that selling pressure has exceeded buying activity.

Binance's BTC/USDT futures prices with OI and CVD. (Coinglass)

Investor Chris Burniske said that in 2021, BTC fell by 56%, ETH fell by 61%, SOL fell by 67%, while many other altcoins fell by 70-80%. Therefore, he believes that we are still in the middle of the bull market and that those who believe that the market has entered a full-scale bear market are actually misled.

But overall, the market has entered a state of extreme panic, and the market for large-scale altcoins will not be likely to rise in the future. It is urgent to implement practical favorable policies or achieve interest rate cuts to support short-term recovery.