Woke up. Let's talk about the situation in the early morning, the reasons for the decline, and the operations.

First, the reason for the decline is Trump's tariffs on China, which triggered some asset liquidation, with USDe being one of them. The main reason for USDe is the 12% yield, and some friends have mortgaged and borrowed USDe to earn interest, especially with small coins. Many friends also leveraged, so when the market is bad and declines, it triggers liquidations.

At this time, a large number of friends want to repay their loans and need to exit USDe, but the depth is temporarily not that large, so USDe has a significant negative premium. I did not buy USDe; I was willing to buy USDT and USDC before because I knew that these two companies had sufficient cash collateral, but I am not as familiar with USDe, so this money is beyond my understanding, and I don't feel justified in making a profit.

Early in the morning, I saw many friends, including well-known figures, saying that it was caused by USDe, which was somewhat hasty, although it is indeed due to the cycle of loans. However, compared to the scale of USDe, it is far behind $ETH or $SOL. The relevant explanation given by Binance today shows that besides USDe, there are also $BNSOL and $WBETH, especially the cycle loan positions of ETH are heavier. In the early morning, ETH directly dropped by more than 20%. Thanks to Owen Jin @OwenJin12 for corroborating my judgment.

So my personal feeling is that the market has exaggerated the impact of USDe. There is indeed an effect, but compared to the more mature ETH cycle loans, the impact should be limited.

The main reason for the decline is still that there are too many cycle loans. I mentioned before that the leverage was too heavy. Although I watched the entire process yesterday, I didn't buy anything for two main reasons: one is that the funds were in DeFi protocols for investment, and it would take seven days to withdraw; the other part of the funds was on Coinbase, and I momentarily forgot about it, which shows that drinking can lead to mistakes. Secondly, I prioritized repaying the $SOL loan with cash on Binance, as I was worried about a severe market crash. I was left with a little cash and was too lazy to move it, and I regretted forgetting about the cash deposit on Coinbase.

During this period, the best assets to bottom out are still various mainstream pegged assets, including BNSOL and WBETH, which are essentially still SOL and ETH. Additionally, bottom-fishing small coins for rebounds is also fine. The best method is to bottom out according to market capitalization rankings, which is safer. This issue occurred after the market closed on Friday, and the weekend is typically the time with the worst liquidity. Although Trump mentioned considering countermeasures while the US stock market was still open, the actual countermeasures were announced at 5 AM Beijing time. This intentionally avoided the opening time of the US stock market, so the impact on the US stock market was not significant, but cryptocurrencies were at their most vulnerable time.

The biggest lesson from this incident is not to use too much leverage just because it is a stablecoin. Even with USDT and USDC, one should be cautious; the risk of leverage above one times is very high. When I shared the borrowing chart yesterday, some friends asked why I only pulled 50% of the limit. Even so, my liquidation price at that time was $155 for SOL. If I had used the maximum collateral limit, I would have definitely been liquidated, and I hadn't used VIP lending, so my immediate reaction was to repay the loan first. However, looking back now, if that money had been used to bottom out, even if I had been liquidated, I would have likely made more. But in that environment, my mind was a bit overwhelmed; drinking led to mistakes x2.

The biggest loss was two long positions in $BTC, which I could have completely avoided losing. The main issue was that the exchange crashed, and I couldn't place orders, just watching the liquidation happen. Fortunately, the contract itself was profitable, and it was also a small position, so it was a pity not to make money in such a big market movement. The biggest lesson for me is not to put all the liquidity prepared for bottom-fishing into DeFi, where it cannot be immediately used for bottom-fishing.

This article is sponsored by #Bitget | @Bitget_zh

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