This document explores the often-overlooked truths behind cryptocurrency market crashes. While volatility is inherent in the crypto space…Continue reading on Coinmonks »This document explores the often-overlooked truths behind cryptocurrency market crashes. While volatility is inherent in the crypto space…Continue reading on Coinmonks »
The 10 Untold Truths Behind Cryptocurrency Market Crashes
1 min read
This document explores the often-overlooked truths behind cryptocurrency market crashes. While volatility is inherent in the crypto space, understanding these underlying factors can provide valuable insights into the causes and potential warning signs of significant market downturns. We will delve into ten key aspects that contribute to these crashes, offering a concise explanation of each.
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cryptocurrency market crashes
1) Leverage builds silently — then liquidations cascade
What happens: Perpetual futures and margin borrowing let traders run high leverage. When price dips, forced liquidations sell into a falling market, pushing price lower, triggering more liquidations — a feedback loop.
Tells to watch:
- Open interest soaring faster than spot volume
- Funding rates deeply positive for days (crowded longs)
- “Long/short ratio” skewed, and liquidation heatmaps clustering near obvious levels
Defense: Keep exposure sized for a 20–40% single-session wick; avoid chasing positive funding; use stop-losses or hedges.
2) Stablecoin stress = liquidity rug
What happens: If a major stablecoin depegs (or is feared to), market makers pull risk, books thin…
Market Opportunity
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