Cryptocurrencies plunge again, market panic intensifies; is the bull market still on?

Shaw, Jinse Finance

Around 11 PM on November 3rd, the cryptocurrency market experienced another sharp drop, with Bitcoin, Ethereum, and several major altcoins all experiencing rapid declines in a short period.

Bitcoin briefly fell below $106,000, a drop of over 4% in 24 hours; Ethereum briefly fell below $3,600, a drop of over 7% in 24 hours. In the past 24 hours, a total of $1.285 billion in positions were liquidated across the network, including $1.161 billion in long positions and $124 million in short positions.

Since the beginning of November, the expected rebound has failed to materialize, instead continuing its downward trend with another sharp drop. What factors have exacerbated market panic? Is this bull market nearing its end? Has the market bottomed out?

I. Cryptocurrencies Plunge Again in the Evening and Early Morning Around 11 PM last night, the cryptocurrency market experienced another plunge, with Bitcoin, Ethereum, and several major altcoins all experiencing rapid, short-term declines. The market rebounded slightly after midnight, but lacked upward momentum and declined again. Bitcoin fell below $106,000, briefly touching $105,306.56, a 24-hour drop of over 4%, with a 1-hour volatility of 2.44%; Ethereum fell below $3,600, briefly touching $3,558.82, a 24-hour drop of over 7%, with a 1-hour volatility of 4.21%. Major cryptocurrencies such as BNB, SOL, and LTC also experienced significant short-term declines. Data shows that the Fear & Greed Index dropped to 21 today, changing from Fear to Extreme Fear. According to Coinglass data, in the past 24 hours, a total of $1.285 billion in positions were liquidated across the entire network, including $1.161 billion in long positions and $124 million in short positions. Bitcoin liquidations totaled $326 million, Ethereum liquidations totaled $335 million, and Solana liquidations totaled $155 million. This short-term plunge in cryptocurrency prices has cast a further shadow over the already escalating market panic.

II. DeFi Protocol Balancer Attacked, Triggering Market Panic

Yesterday afternoon, the DeFi protocol Balancer was reported to have been attacked, with a large amount of assets, including WETH, Staked ETH, and wstETH, being transferred from the protocol's vault address. According to Lookonchain monitoring, the losses from the Balancer protocol attack have reached $116.6 million. Balancer officially stated that Balancer V2 composable stable pools suffered an attack. Since these pools have been running on-chain for many years, many have exceeded their pauseable time window. Currently, all pools that are still pauseable have been paused and are in recovery mode. Other Balancer pools were unaffected. This issue is limited to V2 composable stable pools and does not affect Balancer V3 or other types of pools. The engineering and security teams are prioritizing the investigation. Balancer officials also stated that they are willing to pay 20% of the stolen assets as a white-hat reward to help recover the assets, valid for 48 hours. Furthermore, GoPlus posted on social media that all DeFi projects forking Balancer are affected by this vulnerability, and multiple protocols have been attacked. They advised investors to check the list of Balancer forks on the Defiama website, immediately stop interacting with them, and withdraw their assets for protection. Hasu, Director of Strategy at Flashbots and Strategic Advisor at Lido, stated that Balancerv2, launched in 2021, has since become one of the most watched and frequently forked smart contracts. This is very worrying. Every time a contract that has been online for so long is attacked, it (naturally) sets back the adoption of DeFi by 6 to 12 months. As a major DeFi protocol that has been online for many years, the negative impact of the attack on Balancer is widespread, once again raising questions about the security of DeFi protocols. This event may have also triggered market panic, stimulating a short-term rapid decline in the crypto market. Third, ETF funds continue to flow out, and institutional investors temporarily withdraw. Farside Investors data shows that last week, US Bitcoin spot ETFs saw a net outflow of $799 million, and Ethereum spot ETFs experienced net outflows for three consecutive days, totaling $363 million. Furthermore, Lookonchain monitoring shows that yesterday, 10 Bitcoin ETFs saw a net outflow of 1,987 BTC (worth $213.65 million), and 9 Ethereum ETFs saw a net outflow of 21,022 ETH (worth $78.2 million). CryptoQuant stated that Bitcoin's recovery lacks sustained inflows from ETFs and Michael Saylor strategies, which are the main demand drivers. Additionally, Matrixport analysis indicates that Ethereum ETFs have again underperformed, with Bitmine being the only institution consistently buying. Inflows plummeted to only $300 million and $600 million in September and October, respectively, and have barely continued since. The continued net outflow of ETF funds reflects, to some extent, the temporary withdrawal of institutional investors, causing the crypto market to briefly lose one of the main drivers of this bull market. Fourth, forced liquidation of whale investors exacerbates market volatility. Large long positions held by whale investors were forcibly liquidated. Lookonchain monitoring shows that the "100% win rate whale" has ended its winning streak, closing all its Bitcoin long positions at a loss, while continuing to reduce its long positions in ETH and SOL. Its total profit/loss changed from +$33 million to -$17.6 million. Subsequently, the "100% win rate whale" returned to long positions, depositing $20 million USDC into Hyperliquid. He immediately established long positions with two large market orders: 150 Bitcoins (approximately $15.8 million) and 5,000 Ethereums (approximately $17.9 million). Onchain Lens monitoring shows that Huang Licheng's 25x leveraged long position in Ethereum was completely liquidated, resulting in a total loss of $15 million. Onchain analyst @ai_9684xtpa also indicates that Huang Licheng currently has only $16,771.24 left in his account. Since October, he has added 1.727 million USDC to Hyperliquid, essentially losing it all, bringing his cumulative losses in his Hyperliquid account to $13.33 million. The large long positions held by whale investors were liquidated during the decline, and then quickly returned to long positions. This frequent leveraged contract trading exacerbated the short-term volatility of the crypto market. Fifth, increased uncertainty surrounding macroeconomic factors such as the Fed's interest rate cut. With the Fed's October rate cut now a certainty, the market has turned its attention to expectations for a December rate cut. However, Fed Chairman Powell's unexpectedly hawkish remarks and the internal divisions reflected in the FOMC statement have weakened market expectations for a December rate cut. CME's FedWatch tool shows a 67.3% probability of a 25 basis point rate cut in December and a 32.7% probability of keeping rates unchanged. The probability of the Federal Reserve cutting interest rates by a cumulative 25 basis points by January is 55.8%, the probability of keeping rates unchanged is 21.8%, and the probability of a cumulative 50 basis point cut is 22.3%. Several Fed governors also have differing opinions on whether to cut rates in December. Cook stated that a December rate cut is possible, but it will depend on any new information released. Milan stated that current monetary policy is still too tight and increases the risk of economic downturn. Bostic stated that a December rate cut is not a certainty. Although the market has strong expectations for a rate cut at the end of the year, Powell clearly stated that a December rate cut is not a sure thing and therefore not a wise move. Furthermore, the ongoing US government shutdown crisis continues to have a negative impact on the macroeconomy. Goldman Sachs economist Alec Phillips warned that the US government shutdown could have the largest economic impact in history, potentially lasting longer than the 35-day shutdown of 2018-19 and affecting more institutions. A six-week shutdown could reduce fourth-quarter economic growth by 1.15 percentage points, with a rebound not expected until early 2026. US Treasury Secretary Bessant also stated that the US government shutdown has begun to affect the US economy. The weakening market expectations for a December rate cut by the Federal Reserve, coupled with the ongoing US government shutdown crisis, have increased macroeconomic uncertainty and also impacted the cryptocurrency market. VI. Is the Market Entering its End Phase, and Future Direction Predictions? Following this cryptocurrency plunge, the market is offering various interpretations regarding whether the bull market has reached its end and how it will develop next. 1. CryptoQuant stated that although Bitcoin's actual market capitalization increased by $8 billion, its recovery lacked sustained inflows from ETFs and Michael Saylor strategies, which are the main demand drivers. 2. Matrixport released a chart analysis stating that Ethereum ETFs performed poorly. After strong inflows of $5.2 billion and $4.3 billion in July and August respectively, inflows plummeted to only $300 million and $600 million in September and October, with little follow-through. Without new institutional demand, Ethereum remains vulnerable to further consolidation and could even face a deeper correction. 3. Katie Stockton, founder and managing partner of Fairlead Strategies, stated in a report that Bitcoin has fallen below the 200-day moving average of $109,800. The 200-day moving average is one of the most widely followed indicators for defining long-term trends and also acts as a support level for Bitcoin. This may indicate that the cryptocurrency will decline further, with the next target potentially at $94,200. A Singapore-based crypto investment firm, QCP Capital, published an analysis stating that the crypto market had an unstable start and continued its downward trend. On-chain data shows that OG holders transferred a large amount of Bitcoin to Kraken, a continuation of the outflows that began in October. The recent sell-off lacked clear macroeconomic drivers, even with other risk assets performing well despite favorable policies. Bitcoin's consolidation has sparked speculation about whether this cycle is nearing its end, and whether this foreshadows a new cryptocurrency winter remains unclear. Currently, long-term holders are taking profits, while institutional inflows and application promotion are consolidating the market foundation. 5. Crypto analyst @IamCryptoWolf posted on the X platform that ETH is undergoing an expanding wedge retracement, with previous resistance levels now acting as solid support. November looks set for steady consolidation, with a potential breakout at the end of the month, followed by an accelerated rise in December. 6. BitMine Chairman Tom Lee, in an interview with CNBC, stated that Ethereum's fundamentals are currently strong, with stablecoin trading volume and application layer revenue both reaching record highs, suggesting a price breakout is imminent. Tom Lee reiterated his previous year-end price prediction, expecting Bitcoin to rise to the $150,000-$200,000 range, while Ethereum will rise to $7,000.

7. Crypto analyst Ali stated, "$3,120 is a key demand zone for ETH, with 2.62 million ETH being accumulated in this area."