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Is crypto entering a self-inflicted crisis? Inside the leverage and solvency spiral

Is crypto entering a self-inflicted crisis? Inside the leverage and solvency spiral

On the surface, US equities posted modest gains on Friday, buoyed by strong forward-looking statements from two major technology companies. The S&P 500 rose 0.3 per cent, the Nasdaq climbed 0.6 per cent, and the Dow Jones added 0.1 per cent. These moves occurred despite a broader backdrop of tightening financial conditions, as the US Federal Reserve signalled increasing reluctance to cut interest rates in the near term. This hesitation has kept risk sentiment muted across global markets, even as equity index futures point to further upside at the open this week.

Bond markets responded with a slight retreat in yields. The two-year Treasury yield fell by 3.5 basis points to 3.574 per cent, while the benchmark 10-year yield declined by 1.9 basis points to 4.077 per cent. Lower yields typically reflect expectations of slower growth or less aggressive monetary tightening, but in this case, the move appears more technical than fundamental, given the Fed’s recent tone.

Meanwhile, the US Dollar Index strengthened by 0.3 per cent to 99.80, its highest level since August, underscoring the greenback’s role as a safe haven amid uncertainty. In commodities, gold pulled back 0.5 per cent to US$4,003 per ounce, as investors took profits following a strong year-to-date rally. Brent crude oil edged up just 0.1 per cent to US$65.07 per barrel, though gains were pared after former President Donald Trump denied reports of an imminent military strike on Venezuela, removing a geopolitical premium from prices.

Asian equities initially mirrored Friday’s losses but rebounded in early Monday trading, suggesting some stabilisation. Attention now turns to a critical week ahead. More than 1,650 US firms, including 133 S&P 500 constituents, will report third-quarter earnings. These results will offer a crucial test of corporate resilience amid elevated rates and slowing global demand. Additionally, the Bank of England is set to announce its monetary policy decision on Thursday. According to Bloomberg surveys, the overwhelming consensus expects the BOE to hold rates steady in November, continuing its pause amid persistent but moderating inflation pressures in the UK.

Against this macro backdrop, the cryptocurrency market tells a markedly different story, one of retrenchment, risk aversion, and structural fragility. Over the past 24 hours, the total crypto market cap declined by 2.06 per cent, extending a seven-day slide of 6.36 per cent. Market sentiment, as measured by the Fear & Greed Index, sits at 36, firmly in “Fear” territory. This anxiety stems not from macro drivers alone but from a confluence of three interrelated stress points: a sharp altcoin selloff, emerging exchange solvency concerns, and a technical breakdown in market structure.

The first and most visible pressure point is the collapse in altcoin performance. The CoinMarketCap Altcoin Season Index plummeted 10 per cent in 24 hours, falling to a reading of 26, the lowest level since April 2025. High-beta assets bore the brunt of the selling. BSquared Network dropped 10.7 per cent, SUI fell 4.8 per cent, and UXLINK suffered a catastrophic 74 per cent decline. This broad-based weakness reflects a pronounced flight to safety within crypto itself, with capital rotating aggressively into Bitcoin. Bitcoin dominance rose by 0.32 percentage points to 59.5 per cent, nearing the psychologically significant 60 per cent threshold. Historically, such dominance levels have coincided with prolonged altcoin underperformance, as risk capital retreats from speculative narratives.

This rotation follows a familiar pattern: the “sell-the-news” reaction after October’s brief surge in optimism around potential HBAR and SOL ETF approvals. That rally attracted leveraged long positions, which are now being unwound. Perpetual futures funding rates across major altcoins rose by 45 per cent in 24 hours, indicating that long-side leverage is being squeezed en masse. Should Bitcoin dominance breach 60 per cent, the outflow from altcoins could accelerate further, triggering additional liquidations in an already fragile ecosystem.

Compounding this dynamic is a renewed fear of centralised exchange risk, centred on MEXC. Users have reported approximately US$40 million in withdrawal freezes, sparking panic amid the platform’s offering of a 600 per cent annual percentage yield on USDT staking, a rate so anomalously high it defies sustainable yield generation in current market conditions. Such yields often signal hidden leverage, unsustainable tokenomics, or outright insolvency. In response, MEXC’s 24-hour trading volume collapsed by 23 per cent, as traders migrated to perceived safer venues like Binance and Coinbase. Stablecoin outflows from the exchange spiked by 37 per cent over the same period, a classic sign of depositor flight.

This episode evokes painful memories of the 2022 collapses of Celsius and BlockFi, where unsustainable yields preceded catastrophic failures. The psychological trauma from that era, what some traders now call “crypto PTSD,” is amplifying selling pressure beyond what fundamentals alone would justify. The fear is not just about MEXC’s solvency but about potential contagion. If a mid-tier exchange like MEXC faces liquidity constraints, could larger platforms with similar opaque practices be next? This question looms large as trust remains the scarcest commodity in crypto.

From a technical perspective, the market structure has also deteriorated. The total crypto market capitalisation has broken below its 30-day simple moving average of US$3.78 trillion, a key support level watched by algorithmic and institutional traders alike. The Relative Strength Index (RSI) sits at 42.75, below the neutral 50 mark but not yet in oversold territory, suggesting room for further downside. Compounding the bearish signal is a negative MACD divergence, where price makes lower lows while momentum indicators fail to confirm the move, often a precursor to accelerated selling.

Despite the price decline, open interest in derivatives rose by 4.6 per cent in 24 hours. This counterintuitive move indicates that algorithmic traders are actively shorting the breakdown, betting on continued weakness. Such behaviour can create a feedback loop: price drops trigger stop-losses, which fuel further declines, prompting more short entries. In this environment, even modest negative news can spark outsized moves.

The critical question now is whether Bitcoin can hold its US$109,000 support level. While the asset has shown relative resilience, its dominance rising as altcoins bleed, it remains tethered to broader liquidity conditions. A break below US$109,000 could signal a loss of confidence in the entire crypto ecosystem, potentially triggering a broader liquidity crunch. Unlike in 2022, when macro tightening was the primary driver of crypto’s collapse, today’s risks are more endogenous: leverage, exchange opacity, and speculative excess within the asset class itself.

The current selloff is not merely a reaction to Fed policy or dollar strength. It is a stress test of crypto’s internal architecture. The combination of altcoin deleveraging, exchange solvency fears, and technical breakdowns has created a perfect storm of bearish momentum. While traditional markets inch higher on tech strength and earnings hopes, crypto remains mired in a crisis of confidence. Traders must watch not only price levels but also on-chain flows, exchange reserves, and funding rates for signs of stabilisation or further unraveling. Until then, caution remains the only rational stance.

 

Source: https://e27.co/is-crypto-entering-a-self-inflicted-crisis-inside-the-leverage-and-solvency-spiral-20251103/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Circular capital: Inside the closed-loop ecosystem propelling (and distorting) the AI boom

Circular capital: Inside the closed-loop ecosystem propelling (and distorting) the AI boom

The artificial intelligence sector is experiencing an unprecedented surge, driven by what many observers describe as an arms race among tech giants and startups alike. Major players like Microsoft, Amazon, Nvidia, and Oracle are pouring billions into promising AI ventures such as OpenAI, Anthropic, and Scale AI, creating intricate funding ecosystems that blur the lines between investment and self-serving commerce.

These startups, in turn, funnel much of that capital back into the investors’ own products, including cloud computing services, specialised chips, and data infrastructure. This circular flow of money strengthens the positions of a handful of dominant companies while raising serious questions about competition and the efficient use of resources in a field still in its early stages.

Circular capital loops

This setup resembles a high-stakes poker game where the house always wins, potentially stifling innovation from smaller players and inflating valuations beyond sustainable levels. The industry appears to operate on the belief that AI could evolve into a winner-take-all market, justifying these closed loops as a necessary hedge against being outpaced.

Recent reports indicate OpenAI’s valuation has climbed to around 324 billion dollars, with Anthropic not far behind at 178 billion dollars, figures that underscore the rapid escalation in private market enthusiasm. Scale AI, meanwhile, maintains a valuation near 29 billion dollars, often tied more to projected spending on infrastructure than to immediate revenue streams.

Regulatory scrutiny mounts

Regulatory scrutiny is intensifying as these dynamics unfold, with authorities expressing growing alarm over market concentration and potential antitrust issues. Nvidia, commanding over 80 per cent of the AI chip market, faces investigations from the US Department of Justice regarding its acquisition of Run:ai, a move that could further entrench its dominance.

The Financial Stability Board has issued warnings about the systemic risks posed by AI’s heavy reliance on a limited number of infrastructure providers, highlighting vulnerabilities in areas like cybersecurity and model governance that could cascade through the financial system. In my view, these concerns are well-founded, as the concentration of power in a few hands echoes past tech bubbles where over-dependence on key suppliers led to widespread disruptions.

Capital allocation risks

The circular capital loops exacerbate this, as seen in deals where OpenAI commits to massive spending on Oracle’s cloud services following investments from similar tech behemoths. While analysts remain optimistic about AI’s transformative potential in the long term, they caution against short-term returns hampered by regulatory hurdles and inefficient capital allocation.

The risk of overvaluation looms large, with private AI firms’ worth often predicated on future infrastructure expenditures rather than proven profitability, a pattern that could precipitate corrections if growth expectations falter.

Macro market backdrop

Shifting to broader economic indicators, global risk sentiment stays subdued as markets await new developments amid worries ranging from labor market slowdowns to persistent inflation. Investors are closely monitoring upcoming US initial jobless claims data, with estimates around 233,000 following last week’s 231,000, a figure that could sway perceptions of the Federal Reserve’s policy direction.

The Swiss National Bank recently held its policy rate at 0.00 per cent, aligning with expectations and reflecting a cautious approach to monetary easing in the face of stable inflation. Wall Street closed lower on Wednesday, with the Dow Jones Industrial Average down 0.37 per cent at 46,121, the S&P 500 off 0.28 per cent at 6,638, and the Nasdaq declining 0.34 per cent to 22,498, driven by retreats in technology stocks amid valuation concerns.

Wall Street and commodities

Treasury yields edged higher, with the 10-year note at 4.147 per cent and the 2-year at 3.604 per cent, signalling mixed expectations for interest rate paths. The US dollar index strengthened by 0.6 per cent to 97.873, while gold prices dipped 0.7 per cent to 3,736 dollars per ounce, pulling back from recent highs as the dollar gained ground. Brent crude rose 2.5 per cent to settle at 69.31 dollars per barrel, buoyed by supply concerns from ongoing geopolitical tensions in Ukraine impacting Russian oil facilities.

Asian equities showed mixed performance, with Chinese markets buoyed by AI and tech optimism, though early trading today indicated continued variability. US equity futures point to a higher open, suggesting some rebound potential. In my opinion, this muted sentiment reflects a market grappling with uncertainty, where AI hype provides sporadic lifts but broader economic signals like job data and yields temper enthusiasm, potentially setting the stage for volatility if inflation proves stickier than anticipated.

Crypto under pressure

Turning to cryptocurrencies, contrary to chatter among some circles that altcoins are outperforming Bitcoin, the data paints a different picture of weakening momentum for alternatives. The CoinMarketCap Altcoin Season Index stands at 68 out of 100, still in altcoin territory but down 4.23 per cent over the past 24 hours from last week’s 77, indicating a cooling trend.

Bitcoin’s dominance has risen to 57.97 per cent, up 0.25 points in the last day, as capital shifts toward the flagship cryptocurrency amid altcoin retreats. Ethereum, a bellwether for the sector, has fallen 11.6 per cent weekly, with Chainlink down 11.2 per cent and Cardano dropping 12.0 per cent, underscoring broader underperformance.

Derivatives markets reinforce this caution, with altcoin funding rates turning negative at -0.00035835 per cent and open interest declining 4.1 per cent in 24 hours, compared to Bitcoin’s more resilient metrics.

Investor takeaway

From my standpoint, this shift signals a risk-off environment in crypto, where Bitcoin’s perceived safety draws inflows during uncertainty, much like gold in traditional markets. Historically, Altcoin Season Index readings dipping below 70 often herald Bitcoin dominance rebounds, and current social discussions around Ethereum’s high fees and upcoming upgrades like Pectra in Q4 2025 add to the drag.

Traders unwinding leveraged positions faster in altcoins than in Bitcoin further erodes confidence in near-term rallies for alternatives, suggesting investors should prioritise Bitcoin amid this rotation.

Overall, the interplay between AI’s frenetic funding cycles, emerging regulatory pressures, subdued macro conditions, and crypto’s Bitcoin-centric tilt illustrates a financial landscape fraught with opportunity and peril.

I believe the AI arms race, while fuelling innovation, risks over-investment that could echo the dot-com era’s excesses if not tempered by competition and oversight. Investors would do well to diversify beyond concentrated bets, monitoring systemic risks and market signals closely to navigate what may prove a pivotal juncture for technology-driven growth.

 

Source: https://e27.co/circular-capital-inside-the-closed-loop-ecosystem-propelling-and-distorting-the-ai-boom-20250925/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Gold jumps 3.3 per cent, Nasdaq soars 12.1 per cent, Bitcoin increases 7 per cent: Inside Trump’s tariff rollback effects

Gold jumps 3.3 per cent, Nasdaq soars 12.1 per cent, Bitcoin increases 7 per cent: Inside Trump’s tariff rollback effects

April 10, 2025, the world woke up to a dramatic shift in global risk sentiment, spurred by President Donald Trump’s unexpected announcement of a 90-day pause on reciprocal tariffs for most countries, excluding China.

This move, paired with a jaw-dropping 125 per cent tariff hike on Chinese imports, has sent shockwaves through markets, igniting a rollercoaster of reactions that deserve a deep and thoughtful exploration. Let’s unpack this market wrap, weaving together the data, the human stakes, and my own take on what it all means.

The announcement came like a thunderclap after days of escalating tension, with both the US and China locked in a high-stakes game of economic brinkmanship. Just yesterday, tariffs on China jumped by another 50 per cent, pushing the total to an unprecedented 125 per cent. It’s a bold, almost theatrical escalation, signalling that Trump is doubling down on his hardline stance against Beijing.

Meanwhile, the 90-day pause on tariffs for other nations—a flat 10 per cent duty remains in place—offers a lifeline for negotiations, a chance to step back from the edge of a full-blown global trade war. The markets, ever sensitive to such twists, responded with a fervour that hadn’t been seen in years.

The S&P 500 surged 9.5 per cent, its largest single-day rally since October 2008, while the Nasdaq soared 12.1 per cent, marking its biggest daily gain in 24 years. The CBOE Volatility Index, or VIX, often dubbed Wall Street’s “fear gauge,” plummeted 35.8 per cent to 33.62, a dramatic exhale after peaking at 52.33. It’s as if the markets collectively sighed in relief, at least for now.

What’s driving this euphoria? For one, the pause on universal tariffs has lifted a dark cloud of uncertainty that had been suffocating investor confidence. The prospect of reciprocal tariffs—matching duties imposed by other countries on US goods—had threatened to choke global trade, spike inflation, and drag economies into recession. Trump’s decision to hit the brakes, even temporarily, suggests a willingness to negotiate rather than bulldoze ahead, a pragmatic pivot that markets have seized upon.

But it’s not all rosy. The US-China trade war is intensifying, and with neither side showing signs of backing down, the stakes are higher than ever. The 125 per cent tariff on China is a gauntlet thrown down, a dare for Beijing to retaliate further or come to the table. It’s a risky play, and one that could backfire if China opts for escalation over compromise.

Turning to the bond market, US Treasury yields paint a complex picture. The 10-year yield climbed 3.9 basis points to 4.332 per cent, and the 2-year yield leaped 18.2 basis points to 3.908 per cent, reflecting a surge in risk-on sentiment. Yet, the 20-year and 30-year yields bucked the trend, easing slightly, a subtle hint that investors remain wary of the long-term fallout from this trade saga.

The robust demand at the 10-year Treasury note auction underscores a flight to quality amid the chaos—investors still see US debt as a safe harbour, even as yields tick higher. The US Dollar Index, however, barely budged, slipping just 0.1 per cent. This muted response stands in contrast to the sharp declines in safe-haven currencies like the Swiss franc and Japanese yen, both down 1.0 per cent, as risk appetite roared back to life.

Commodities, too, joined the rally. Gold, often a barometer of fear, surged 3.3 per cent—its biggest one-day gain since March 2020—settling above US$3,100 per troy ounce. At first glance, this might seem counterintuitive given the risk-on mood, but it reflects a dual narrative: relief at the tariff pause, coupled with lingering unease about the US-China standoff. Brent crude oil, meanwhile, climbed 4.2 per cent to US$65 per barrel, buoyed by optimism that a broader trade war might be averted, at least for now.

Over in Asia, indices like the HSCEI rose 3.2 per cent, fuelled by hopes of more Chinese stimulus to counter the tariff squeeze. It’s a fragile optimism, though—US equity futures are already signalling a lower open, suggesting that yesterday’s euphoria might be short-lived.

The crypto market, ever a wild card, erupted in tandem with traditional assets. Bitcoin surged eight per cent to reclaim US$84,000, its strongest intraday gain since mid-March, sparked by Trump’s tariff rollback. Technical indicators hint at a potential sell-wall at US$85,000 as traders eye profits, but the momentum is undeniable. This rally comes on the heels of BlackRock CEO Larry Fink’s Monday warning that global markets could sink 20 per cent if tariffs took full effect—a prediction that now looks prescient, though his call for a “buying opportunity” has proven spot-on with this rebound.

Binance, commanding nearly half of Bitcoin’s spot trading volume, has solidified its dominance, with its altcoin market share swelling from 38 per cent to 44 per cent in Q1. It’s a testament to the exchange’s ability to capitalise on volatility, though it’s squeezing competitors in the process.

Ethereum, however, tells a darker story. Sliding to US$1,380—a level unseen since March 2023—it’s caught in a relentless downtrend, battered by macroeconomic headwinds and uncertainty over US trade policies. Sentiment in the crypto space is souring, with investors questioning whether ETH’s bullish structure can hold. Yet, there’s a glimmer of hope: CryptoRank data shows Ethereum trading below its realised price, a rare signal that’s historically preceded strong recoveries. It’s too early to call a bottom, but this could be an accumulation zone for the brave.

On the central bank front, the Fed’s March FOMC minutes offered little solace, overshadowed by trade developments. Policymakers flagged “longer-lasting inflationary pressures” from tariffs, with risks to inflation skewed upward and employment downward. It’s a sobering assessment, hinting at a Fed that’s boxed in—rate cuts could stoke inflation further, while holding steady might choke growth. Across the Pacific, the Reserve Bank of New Zealand (RBNZ) delivered a 25-basis-point cut, as expected, with a dovish tilt suggesting more easing ahead as Trump’s tariff fallout unfolds. Central banks are on edge, and rightly so.

So, what’s my take? This market wrap is a tale of two narratives: relief and reckoning. The 90-day tariff pause has unleashed a wave of optimism, giving stocks, commodities, and Bitcoin a much-needed boost. It’s a lifeline for a global economy teetering on the brink, and investors are grabbing it with both hands.

But the US-China trade war is a festering wound that won’t heal easily. That 125 per cent tariff is a provocation, and China’s next move—whether retaliation or negotiation—will shape the months ahead. The markets may be celebrating today, but this feels like a sugar high, not a sustainable recovery. Volatility isn’t going anywhere; the VIX may have eased, but at 33.62, it’s still elevated, signaling more turbulence to come.

I’m skeptical of Trump’s strategy. The pause is a shrewd tactical retreat, but the China escalation reeks of bravado over substance. It’s a gamble that could juice US manufacturing in the short term—hence the market’s cheer—but risks long-term damage if global trade fractures. The Fed’s caution and the RBNZ’s dovishness underscore the fragility of this moment.

For investors, it’s a time to tread carefully: the rally is real, but the risks are just as tangible. Gold’s surge tells me fear hasn’t left the building, and Ethereum’s woes remind us that not every asset thrives in chaos. As a journalist, I’ll keep digging, watching for the next twist in this saga—because if there’s one thing I’ve learned, it’s that in markets and politics, the only constant is change.

 

 

 

Source: https://e27.co/gold-jumps-3-3-per-cent-nasdaq-soars-12-1-per-cent-bitcoin-increases-7-per-cent-inside-trumps-tariff-rollback-effects-20250410/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j