Collection of Opinions: Tariffs, Whales, or Market Makers—Who Is the Culprit Behind Today’s Crypto Market Crash?

Original source: Odaily Asher

 

This morning, BTC experienced a maximum intraday drop of over 13%, hitting a low of $102,000 and currently reporting at $112,000. ETH once plummeted more than 17%, while XRP and DOGE saw even steeper drops of over 30%. For more on market trends, see “Night of Panic: Highest Single-Day Liquidation in History at $19.1 billions, Wealth Flows Wildly,” “During the Crash, Who ‘Licked Blood from the Knife’s Edge’ and Made Hundreds of Millions? Which Get-Rich-Quick Opportunities Are Close at Hand?” and “The Largest Liquidation Day in Crypto History: The Whale Knife Fight Behind the Scenes—Bears Feast and Leave the Table.”

Although the market generally believes that Trump’s tariff remarks disturbed crypto market sentiment, the short-term plunge in altcoins this time far exceeded expectations. What exactly triggered this sudden collective drop in altcoins? Below are various analyses and opinions compiled by Odaily.

Crypto KOL Phyrex: The Crash May Be Due to Trump’s Tariff Policy Toward China

According to crypto KOL Phyrex on X, there is no doubt that today’s market collapse was entirely caused by Trump’s imposition of tariffs on China. The market had already assumed that although US-China relations were not particularly friendly, the ongoing extension of tariffs could still create an ostrich effect. However, Trump’s tariff action on Chinese exports directly tore apart the weakest link in the tariff chain.

Since February last year, every time the tariff issue involved China, the market would drop, and this time was no exception. Still, I always felt that US-China relations would not escalate to a very tense level. Last time, the 125% tariff ended after negotiations between the two countries, so personally, I don’t think US-China relations are a reversal factor for the market. But now, there is indeed some panic in the market, and there’s nothing that can be done about it. It’s unclear how long this situation will last, and the panic may not be over yet.

Santiment: Surge in Discussions Over New US-China Tariff Concerns Is the Main Factor Behind This Morning’s Drop

On-chain data platform Santiment stated that this morning’s plunge may have been triggered by heightened market panic due to renewed US-China trade tensions, with crypto assets displaying even stronger risk asset characteristics amid geopolitical risks.

In the short term, US-China negotiations will remain at the core of trade decisions between the two countries. If Trump and China make progress in negotiations and bring positive news, retail sentiment toward crypto will suddenly improve; if relations deteriorate further, bitcoin could fall below $100,000.

Crypto KOL Vida: The Cause of This Massive Liquidation Event May Be Forced Liquidation of USDE Arbitrageurs’ Loop Lending Positions

Crypto KOL Vida posted on X, speculating that this massive liquidation event occurred in a low-liquidity, sharply declining market environment, with the following chain reaction:

First, USDE arbitrageurs’ loop lending positions were forcibly liquidated, causing the USDE price to drop; then, as USDE served as collateral in unified accounts, its value fell, weakening collateral capacity; this further triggered more market maker positions using USDE as margin to be liquidated; subsequently, earn-type assets like BNSOL and WBETH also hit liquidation thresholds; although these assets have high collateral rates, their prices are mainly supported by order books, and at that time, the market lacked buy orders and the peg mechanism failed; as a result, prices collapsed rapidly, and the liquidation chain reaction expanded further.

Overall, it’s likely that some market makers using unified accounts also suffered liquidations, which explains why many small tokens experienced extreme price volatility at the time.

Arthur Hayes: Automatic Liquidation of Cross-Margin Collateral by Large CEXs Triggered Altcoin Crash

BitMEX co-founder Arthur Hayes stated that automatic liquidation of cross-margin collateral by large centralized exchanges (CEXs) was the reason for the sharp decline in many altcoins during this price drop. He also noted that many high-quality altcoins are unlikely to experience such price drops again in the short term.

Primitive Ventures Founder: The Crash May Have Been Caused by a Large Institution’s Massive Liquidation on Binance

Primitive Ventures founder Dovey posted on X, speculating that the crash was caused by a large institution (possibly a trading firm using cross-margin) experiencing massive liquidations on Binance. Although further analysis is needed, initially, USDe’s price on Binance once fell to $0.6, while prices on other platforms remained relatively firm. In addition, there was a huge difference in trading volume between tokens listed on Binance and those not listed on Binance.

Crypto KOL Bugsbunny: This Morning’s Crypto Market Crash Was Due to Active Market Makers

Crypto KOL Bugsbunny posted on X, stating that market makers have limited funds, and these limited funds are allocated differently across projects, categorized as Tier 0, Tier 1, Tier 2, Tier 3, and Tier 4, with varying liquidity provision.

Tier 0 and Tier 1 projects receive the most funds, while Tier 2 and Tier 3 projects are handled more casually. After Jump collapsed, many projects fell into the hands of active market makers—essentially, very aggressive market makers who lack sufficient hedging awareness and rarely consider tail risk, only thinking about normal market conditions, not extreme ones.

So, at the moment Trump confirmed the reintroduction of tariffs, there wasn’t enough capital to support all projects. Only the big projects could be guaranteed. Funds originally used to support small projects were even diverted to bigger Tier 0 and Tier 1 projects. This led to a situation where, when there was massive selling pressure, market makers simply didn’t have enough funds to place orders, resulting in no counterparty and prices being liquidated all the way down, as with IOTX, almost to zero.

Crypto KOL Hanbalongwang: The Crash May Have Been Caused by USDe Loop Lending, Margin Leverage Doubling, and Trump’s Trade War, with Market Makers Suffering Heavy Losses

Crypto KOL Hanbalongwang posted on X, stating that the crash may have been caused by the 12% subsidy on USDe, prompting many market users to engage in USDe loop lending. Affected by Trump’s trade war, USDe was attacked with a premium, leading to liquidation of USDe loop loans and further decline in USDe. In addition, some whales and market makers used USDe as margin in contracts, and due to USDe’s depegging and discount, leverage was inexplicably doubled, causing even 1x long positions to be liquidated. This triggered a chain reaction: small altcoin contract prices fell rapidly, USDe dropped quickly or even doubled its drop, and market makers ultimately suffered heavy losses.

Crypto KOL Da Orange: WBETH, BNSOL and Other Contract Margins Should Not Reference Spot Trading Pair Prices; Stampede-Style Drops Could Have Been Avoided

According to crypto KOL Da Orange in a community post, he previously mentioned WBETH risk control issues during a Binance Square options livestream. His main point: since Binance already allows WBETH and BNSOL as contract margin, there’s no need to reference spot trading pair price indices; the exchange rate could simply be fixed at 1:1.

The reason is simple—these two assets are essentially internal assets within the Binance ecosystem, and Binance can mint and burn them at will. If a problem arises, the risk can be balanced out through a redemption cycle. Last night’s “stampede-style” drop could have been completely avoided.

Crypto KOL Forgiven: This Crash May Have Been a Premeditated Attack Targeting Binance’s Main Market Makers

Crypto KOL Forgiven posted on X, stating that this crash may have been a premeditated attack targeting Binance and one of its main market makers, with the Achilles’ heel being the unified account contract margin issue on Binance. In addition to normal USDT-margined and coin-margined margin, Binance also allowed POS derivatives and yield-bearing stablecoins as unified margin options.

The three most severely attacked margin assets this time were USDE, WBETH, and BNSOL. As unified account margin, their liquidation prices were based on Binance’s own spot order book prices, rather than being strictly pegged. In contrast, BFUSD, also used as unified margin, is strictly pegged, and on-chain Aave’s oracle price for USDE is hardcoded at 1:1, so there was no large-scale liquidation.

With BTC and altcoins generally falling, contract traders were likely losing money, and with coin-margined margin, in addition to the coin price falling, the margin itself depegged sharply—USDE fell as low as 0.65, WBETH to 0.2, BNSOL to 0.13. Even hedged portfolios couldn’t maintain positions due to the sharp shrinkage of margin. This triggered a chain liquidation of most Binance contract positions and these three margin assets.

Besides regular contract traders, market makers using these three assets as margin were forced to close all positions and liquidate their margin. In addition to margin liquidations, USDE was further impacted because Binance launched a 12% yield product for USDE, leading many stablecoin whales to use Binance lending products for USDE loop lending, making the attack even more devastating.

Crypto KOL Huangdao: The Crash May Have Been Caused by a Bug in Binance’s Market Making Mechanism, Bringing Down the Entire Crypto Market

Crypto KOL Huangdao posted on X, stating that the culprit behind today’s market crash may have been a bug in Binance’s market making mechanism. Almost all altcoins on Binance experienced abnormal plunges after 5:18, causing prices on other exchanges to follow. Take SUI as an example: before 5:17, prices on Binance and COINBASE were both at $2; after 5:18, COINBASE began to rebound, while Binance saw an abnormal plunge, with a maximum drop of 82%, compared to COINBASE’s maximum drop of only 38%, and then highly volatile wicks.

Even more telling, the PAXG gold contract also began to plunge abnormally at 5:18, even though the gold contract was closed during this period and should not have fluctuated, indicating that Binance’s market making mechanism experienced an anomaly at 5:18, causing all assets to plunge abnormally.

Yilihua: The Crash Was Caused by Multiple Factors, Meme Craze Drained Market Liquidity and Killed Altcoins

Liquid Capital (formerly LD Capital) founder Yilihua posted on X, stating that this was the first time since calling ETH that he fully closed all positions (on-chain and public), previously only using leveraged lending. Several reasons can be cited: first, bitcoin reached a new high resistance level and would correct without major positive news; second, US stocks hit new highs, with AI and semiconductor companies playing capital games that can’t be sustained; third, Japan is about to get a new prime minister, increasing rate hike risk and rising interest rates; fourth, altcoins have been in a persistent downtrend, and the MEME craze has drained liquidity.