On September 14, LSK surged by 97.37% in a single day. CATE rose 34%, and BTW jumped 32%. Yet on the same day, 114,246 people were liquidated for a total of $278 million.
1. The leverage trap behind the sudden surge
The LSK price skyrocketed from $0.6694 to $1.31. Even more extreme, on September 13 it had already surged 512.7% in one day to hit $1.98, then crashed to $0.98. The truth is a leverage-driven short squeeze: within 24 hours, LSK liquidated $41.13 million, including $33.68 million for shorts and only $7.44 million for longs—an 4-to-1 liquidation ratio showing that the rise was driven by forced short covering, not by genuine buy demand.
Its circulating market cap is only about $96.94 million (global rank 670), yet its 24-hour trading volume reaches $523 million and the turnover rate is 606%. Price fluctuations have completely detached from the fundamentals of real liquidity; it’s nothing but a game of leveraged funds.
2. The Pseudo-Outflow Effect of the Zcash ETF
Since its listing on August 25, the Zcash ETF has grown to over $500 million in assets under management. But Grayscale’s parent company DCG injected about $100 million, while external net inflows were only $70 million—external capital is just 14%. Growth in AUM is mainly driven by ZEC’s own price increases and internal injections. Institutional demand for privacy coins’ "compliance needs" has been seriously overestimated. Retail investors mistakenly generalize the compliance narrative as a positive for all privacy coins, then blindly crank up leverage to trade small-cap privacy coins like LSK, ultimately becoming victims of liquidation.
What’s worth watching is that the EU plans to fully ban anonymous privacy coins by July 2027. Fully anonymous coins like XMR will be dealt a fatal blow. In addition, Zcash’s own high 2.5% management fee and its non-1940 Act structure also raise concerns about long-term sustainability.
3. The Fake Prosperity of the Altcoin Season Index
The altcoin season index for shanzhai coins stays at around 70 points in the top range for nearly 90 days, which looks positive. However, the historical confirmation standard requires breaking above 75 points and holding it for at least one week—there is still a gap. More importantly, BTC.D remains as high as 58.37%, far above the sub-50% threshold needed for a broad shanzhai-coin market; the market is still in a "Bitcoin season."
4. The Chain Reaction of Leverage
In a $278 million liquidation, long positions account for $196 million (70%), while short positions are $82.58 million. Most of those liquidated used more than 10x leverage, with margin ratios below 5%-10%, far lower than the 30% safety line. Even more dangerous is cross-asset risk contagion: some users collateralized BTC to go long LSK. When LSK crashed, the BTC collateral was liquidated, directly contributing to the liquidation of BTC long positions—risk contagion efficiency is extremely high.
5. Risk Signals and Strategies
The risk signals are clear: if BTC falls below the key support level of $76,380, it will trigger deleveraging across the entire market; the 86.5% probability of Fed rate hikes will further amplify volatility.
