Some recent altcoins with an Alpha circulating market cap below 10 million, especially ones like $LYN $star, whose circulating market cap was around 3 million, are still steadily declining. This is most likely related to Binance’s recent adjustments to leverage on altcoin futures.
They often involve the same market maker using a single pool of margin to open several futures positions at once. Once Binance tightens leverage limits, the market maker’s available margin gets squeezed. If they can’t handle it, they have no choice but to pull liquidity. When the order book gets thin, even a modest sell order can create a deep plunge, and it can become impossible to find a counterparty when trying to close a position.
October 11 was a warning sign. In extreme market conditions, market makers prioritized protecting BTC and ETH, pulling liquidity from mid- and long-tail altcoins. Those coins were left without counterparties, and their prices went into free fall.
Now Binance is lowering the leverage ceiling ahead of time. On the surface, this is meant to prevent a cascade, but for these small coins whose circulating market caps have already been battered down to just a few million, if you’re holding positions in them, stop fixating on price direction for now. Focus on liquidity and set your stop-losses.
They often involve the same market maker using a single pool of margin to open several futures positions at once. Once Binance tightens leverage limits, the market maker’s available margin gets squeezed. If they can’t handle it, they have no choice but to pull liquidity. When the order book gets thin, even a modest sell order can create a deep plunge, and it can become impossible to find a counterparty when trying to close a position.
October 11 was a warning sign. In extreme market conditions, market makers prioritized protecting BTC and ETH, pulling liquidity from mid- and long-tail altcoins. Those coins were left without counterparties, and their prices went into free fall.
Now Binance is lowering the leverage ceiling ahead of time. On the surface, this is meant to prevent a cascade, but for these small coins whose circulating market caps have already been battered down to just a few million, if you’re holding positions in them, stop fixating on price direction for now. Focus on liquidity and set your stop-losses.