2025-12-29 08:28:45

The recent trends in the crypto market are truly outrageous—Bitcoin suddenly plunged by 70%, and the index is also bouncing up and down. Many people are starting to wonder whether a bear market is coming or if large funds are just shaking out positions. There are all kinds of opinions in the community, which can be quite confusing.

Honestly, instead of guessing the intentions of exchanges, it's better to understand the essence of market volatility. I've been in this industry for years and found that after all the circling around, the high-volatility phases in the crypto market are driven by just three factors: changes in liquidity, shifts in the capital structure, and macroeconomic environment battles. As long as you clarify these three points, the market's temper won't catch you off guard.

Let's start with liquidity, this "magnifying glass." Liquidity distribution in the crypto market is particularly uneven. Mainstream coins are relatively stable, but small-cap coins and emerging stablecoins are in a dire situation. The recent Bitcoin flash crash occurred in trading pairs with weak liquidity—when a large order hit, the buy orders were directly broken through. Looking at December data makes this even clearer—on December 15th, the trading volume was 10.369 billion, and just nine days later, on December 24th, it shrank to 3.14 billion. Such large fluctuations in liquidity definitely amplify price swings. Think about it—shallow waters can be stirred up easily by the wind, while deep waters remain calm no matter how much you toss them. As institutional funds continue to flow in, overall liquidity will improve, but volatility caused by lack of liquidity in certain corners is unavoidable.

Now, let's look at the shift in the capital structure. In the past, retail investors dominated the crypto market, with money flowing in and out rapidly, leading to a market characterized by sharp rises and falls. Now, large institutions are gradually appearing, and their trading styles are completely different. This process inevitably causes "adaptive volatility."

BTC-0,26%

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LiquidityWhisperer

· 1h ago

You're right, liquidity is the real behind-the-scenes driver. When it dropped 70%, I already said it was a problem with small trades, yet many people are still stuck on the bear market... Wake up, everyone. The analogy of "shallow water and strong wind" is perfect; that's exactly the point. Institutional entry will indeed improve the situation, but in the short term, we still have to endure these fluctuations. This round of "adaptive volatility" is still far from over. Instead of guessing blindly, it's better to focus on liquidity data. That December trading volume dropped from 103 to 31; what are people still asking about? The fund structure has changed, so the strategies definitely need to adapt. Retail traders' pattern of rapid rises and falls should also be upgraded.

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fren.eth

· 7h ago

70% plunge? Wait, is there a mistake in this number… --- Weak liquidity was just broken through by a large order, which is really outrageous. We need to be much more careful. --- Basically, the market is too shallow; even a slight breeze can cause chaos. --- Institutional entry is a good thing, right? But it seems to create more uncertainty… --- Many people have really been shaken out in this wave. I just want to ask, who bought the bottom? --- Instead of studying the three major factors, it’s better to just hodl, since nothing can be seen through anyway. --- December trading volume was directly halved. Looking at this data, I feel a bit panicked.

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OnChain_Detective

· 7h ago

hold up, that 70% dump screams liquidity crunch written all over it. pattern analysis suggests someone got caught with massive slippage on a thin order book situation. flagged that activity immediately when it happened ngl

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MEVSandwichVictim

· 7h ago

70% plunge? Bro, isn’t this just my daily routine, always caught in the middle --- Liquidity is weak like this, small coins can’t be played at all, big orders just break through directly --- Institutions entering to improve liquidity? Waiting to see, by then retail investors will be squeezed even more professionally --- Changing the capital structure doesn’t matter, in the end, we retail investors are the ones losing money --- Instead of analyzing what drives the market, it’s better to think about how to avoid getting caught in the middle --- Really, I just want to know when it will be retail investors’ turn to make money --- I got caught in this drop again, definitely not a good sign

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ZKProofEnthusiast

· 7h ago

In shallow waters, the wind creates waves as soon as it blows. This metaphor is perfect—I am that retail investor who was stunned by these waves.

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ProofOfNothing

· 7h ago

70% plunge? I damn well was sleepwalking, woke up to find my account gone. Liquidity has been known for a long time; small coins are just slaughterhouses, nothing new. Institutions entering the market sounds great, but retail investors are still the victims. This wave of adaptive volatility is probably just to trigger my liquidation. Rather than analyzing the driving factors, it's better to think about how to survive and leave this market.

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