On January 25, 2026, multiple signals appeared simultaneously on-chain and at the regulatory end: on one hand, a giant whale cleared out PUMP, realizing a profit of $3.15 million, 11,190 ETH in collateral positions were liquidated, and USDC Treasury destroyed 50 million USDC in one go, with significant fund migration and risk exposure concentrated in the same time window; on the other hand, BSC ecosystem Meme coins surged 102.3% in 24 hours (GMGN data), contrasting sharply with Bitcoin CEX trading volume dropping to a new low since 2022 (CryptoOnchain). On the same day, the White House released a statement on crypto policy, coupled with CFTC Chairman stating that "the U.S. is suitable for crypto entrepreneurship," which the market interpreted as a warm regulatory signal. Against the backdrop of rising policy expectations and a retreat in on-site liquidity, a key question emerged: is this round of market activity pricing in compliance and technological advancement, or is it a new round of speculative frenzy and bubble deflation under the guise of regulatory imagination?
Who is Taking the Last Baton After the Whale Cleared $3.15 Million?
● Fund Movement: On-chain tracking platform onchainschool.pro shows that a large address completed the clearing operation of PUMP in batches around January 25, achieving an overall paper profit of about $3.15 million, corresponding to an approximate 40% return. From the time distribution, the selling points were concentrated during the phases of increased trading volume and price surges, clearly utilizing the most abundant liquidity and the most exuberant sentiment to smoothly transfer massive chips to subsequent chasing funds.
● Behavioral Pattern: Observing the trading distribution and K-line structure, such whales often quietly lurk at early low levels, extending their holding period through segmented accumulation, hidden within the overall liquidity; after sentiment heats up, they will gradually increase volume in conjunction with high volatility K-lines and increased trading ranges, avoiding panic caused by a one-time dump while fully utilizing the heat of social platforms and the expectation of "trend continuation," selling chips to retail and short-term funds that flood in at different time points, forming a textbook-style "liquidity exit."
● Market Impact: The concentrated clearing by whales impacts short-term prices and holding structures on two levels: first, the selling pressure concentrated at high levels can easily trigger a waterfall-like correction, quickly trapping chasing buyers; second, as chips shift from relatively rational long-term large holders to high-frequency, dispersed small addresses, price support weakens, and in the future, even moderate-scale selling can trigger larger declines. For subsequent funds, even if there is still room for short-term emotional surges, they are facing a high-risk structure with weak support and extremely high chip volatility.
● Data Boundaries: It is important to clarify that current publicly available on-chain data cannot restore the true identity, source of funds, or complete accumulation cost of this PUMP whale; related return calculations are also based solely on visible transfer and transaction records. Any speculation about its identity background, off-market funding relationships, or earlier cost prices exceeds the verifiable range of the data; in risk assessment, this article focuses only on traceable facts on-chain, concentrating on behavioral patterns and their impact on market structure, rather than creating imaginative portraits of individuals.
ETH Whale Liquidation: The Leverage Chain is Shrinking
● Liquidation Event: Also on January 25, on-chain lending protocol monitoring showed that a position collateralized by 11,190 ETH hit the liquidation line and was automatically sold by the protocol to repay debts. Such large liquidations usually stem from a sharp decline in ETH prices over a short period, combined with a high borrowing utilization rate, causing the collateralization ratio to fall below the safety threshold, triggering a series of automatic liquidations and market selling pressure, amplifying the downward volatility slope.
● Leverage Concentration: By combining price fluctuation ranges with the liquidation parameters of mainstream DeFi protocols, it can be inferred that this round of risk is mainly concentrated in high-leverage positions with tight collateralization ratios, rather than dispersed among low-leverage long-term lending users. This means that the market remains stable during slight price pullbacks; however, once the amplitude of fluctuations increases, high-risk positions on the edge will be concentrated for liquidation, forming a short-term stampede. This structural fragility exposes that some participants overly rely on leverage to amplify returns while being inadequately prepared for tail risks.
● On-chain Chain Reaction: The impact of large liquidations on the DeFi ecosystem is not only reflected in short-term selling pressure on ETH but also transmits through multiple paths: first, liquidation bots sell large amounts of ETH for stable assets, temporarily pushing up demand for borrowing and stable assets, which may raise interest rates; second, some users, to avoid liquidation, are forced to add margin or actively close positions, leading to more assets being thrown into the market in a short period; third, risk appetite declines, and the willingness to engage in new borrowing and leverage openings decreases, resulting in a moderate contraction of overall leverage levels, which is beneficial for medium to long-term health but amplifies short-term volatility and cautious sentiment.
● Systemic or Not: Comparing this 11,190 ETH level liquidation against a longer historical dimension, it is still difficult to equate it with the extreme moments of concentrated liquidations of hundreds of thousands of ETH in 2021-2022, being closer to a medium-scale, localized leverage clearing event. From on-chain data, there has not yet been a "systemic stampede" characteristic of simultaneous liquidations across multiple protocols and assets, thus it can be viewed more as a localized correction of overly aggressive positions rather than a signal of an overall break in the entire leverage chain, but it reminds the market: the high-leverage zone has begun to be actively squeezed by the market environment.
USDC Destruction of 50 Million and the Funding Portrait of Volume Bottoming
● Business Scenario: On January 25, USDC Treasury destroyed 50 million USDC. From the perspective of stablecoin issuance and redemption mechanisms, this is closer to a routine redemption and supply adjustment operation rather than a conspiratorial action to "deliberately withdraw liquidity." Typically, when institutions or platforms redeem excess USDC for fiat or other assets, the issuer will destroy the corresponding tokens to maintain consistency between on-chain supply and collateral assets; this process is quite common in daily fund management, with the key being to interpret the underlying funding attitude in conjunction with broader market data.
● Transaction Shrinkage: In response to the contraction of USDC supply, CryptoOnchain data shows that Bitcoin's trading volume on centralized exchanges has dropped to its lowest level since 2022. This indicates a significant reduction in the willingness for active trading on-site, whether for trend trading or short-term swings, with funds willing to gamble heavily in the current price range noticeably decreasing. The shrinkage of transactions does not necessarily point to a one-sided trend, but often signals a period of "price seeming calm, yet liquidity is weak," where small-scale funds can trigger significant price fluctuations in a short time.
● Funding Contraction: Observing the 50 million USDC destruction alongside Bitcoin's spot volume bottoming can sketch a portrait of marginal funding contraction: on one hand, the passive redemption of stablecoin supply reflects a slowdown in net inflows of off-market funds, with incremental funds opting to wait rather than immediately enter; on the other hand, the continued decline in on-site spot transactions shows that existing funds are also reducing their trading frequency, with risk appetite shifting from high leverage and quick in-and-out to a more conservative stance. On the surface, price volatility may tend to ease, but in reality, the market's "capacity to bear pressure" is quietly decreasing.
● Volatility Window: In such an environment, the weakened USDC supply and low transaction volume form a dual amplifier: when there are no clear positive or negative catalysts, the market may maintain low volatility and sideways grinding; once a sudden event occurs—whether regulatory statements, whale transactions, or risk events from a single platform—against the backdrop of a weak order book and contracting on-site funding, it is easy to trigger short-term violent fluctuations. For large funds, this is both a window to test market depth and a hidden opportunity for repositioning or reducing holdings.
Meme Coin Frenzy Under the White House Policy Favor
● Policy Tone: On January 25, the White House released a policy statement on crypto assets, providing directional signals to the market, with the overall wording being interpreted as relatively friendly, emphasizing the promotion of innovation within a compliance framework. On the same day, CFTC Chairman Mike Selig stated that the U.S. is very suitable for entrepreneurship as the "world's cryptocurrency capital," further reinforcing the U.S. positioning to maintain an advantage in the global crypto and Web3 competition. Although specific terms and execution timelines have not yet been clarified, the "non-hostile" nature of the policy direction itself is sufficient to act as an emotional catalyst.
● Speculative Resonance: Under the warm regulatory winds, risk capital did not first flow into infrastructure or compliant assets, but quickly surged into high-volatility assets—GMGN data shows that BSC ecosystem Meme coins surged by 102.3% in 24 hours. This phenomenon presents a typical picture: at the macro level, the policy narrative emphasizes long-cycle innovation and industrial development; at the micro trading level, on-site funds interpret it in a more short-sighted manner as a "speculative window under the policy shield," prioritizing the short-term elevation of the most emotionally amplifying targets.
● Expectation Misalignment: According to the policy's original intention, the warm regulatory winds should be more beneficial to compliant trading platforms, infrastructure projects, and quality assets that can be incorporated into the traditional financial system, but in reality, high-volatility targets like Meme coins absorbed the new risk appetite first. This misalignment of "fund flow and policy direction" will lead to two major consequences: first, it exacerbates bubble formation, forcing regulators to weigh the balance between "risk prevention" and "innovation promotion" when formulating more detailed rules later; second, it puts technology and application projects that truly rely on long-term capital support in a situation where their funds are siphoned off by emotional assets in the early stages.
● Disconnection Between Emotion and Fundamentals: It is important to emphasize that the current White House statement remains at a directional level, with key issues such as specific implementation details, compliance thresholds, tax and disclosure requirements yet to be established. In this highly uncertain environment, the strong fluctuations of short-term emotions and the slow construction of long-term institutional frameworks naturally exist in misalignment. The market prices in a "first speculate on emotions, then look for implementation" manner, meaning that if subsequent rules do not meet expectations, the speculative premium currently supported by policy imagination may quickly unwind.
Ethereum Expansion Achievements and Concerns in the Prediction Market
● Expansion Progress: Beneath the surface filled with emotions and speculation, underlying technology is still advancing steadily. Bitfinex data shows that Ethereum Layer 2 can now process about 2.88 million transactions per day, while overall fees remain at relatively low levels, indicating that the expansion plan has entered a usable and scalable stage in terms of throughput and cost control. Such data provides a realistic foundation for the "large-scale landing of on-chain applications" and creates conditions for the future migration of more complex financial and gaming scenarios.
● Divergence of Funds and Value: Comparing the real progress of Layer 2 with the 102.3% surge of BSC Meme coins in a single day, it is clear to see the misalignment between market focus and value creation: on one side is the improvement in throughput and cost curves after years of investment and iteration, while on the other side is the price fireworks driven by emotions and speculation in a short time. It is not surprising that funds are more inclined to choose the latter in the short term, but this also means that projects and protocols that can truly benefit from the expansion dividends have temporarily not been given valuations and attention that match their technological progress by the market.
● Key of Settlement Mechanism: a16z Crypto pointed out in its research that "faulty settlement mechanisms can undermine trust in prediction markets," and this judgment applies far beyond the narrow definition of prediction markets themselves. Whether it is derivatives protocols, oracle-driven DeFi products, or on-chain governance and identity systems, once there are vulnerabilities in the underlying settlement logic that can be manipulated or frequently rolled back, trust will be quickly eroded, making it difficult for long-term capital to enter. The improvement of the tech stack is not only about performance but also about the robustness of rules and the predictability of outcomes.
● Structure and Fund Allocation: In the next phase of market structure, high-performance public chains and Layer 2 will resemble a "traffic and interaction layer," while secure and robust mainnets and settlement layers will constitute the ultimate anchor for value and trust. For long-term capital, this means that allocation thinking needs to shift from "single track betting" to a combined perspective of "performance layer + settlement layer": the performance layer is responsible for carrying high-frequency interactions and innovative experiments, while the settlement layer ensures the final confirmation of assets and contract outcomes. Those who can find a balance between performance and settlement and form a positive feedback economic model will be qualified to attract the entry of policy and institutional long-term capital.
The Next Scene of Policy Warmth Meets Liquidity Retreat
● Dislocation of Emotion and Liquidity: By integrating signals such as PUMP whale clearing a profit of $3.15 million, 11,190 ETH leveraged liquidation, USDC Treasury destroying 50 million USDC, and Bitcoin trading volume hitting a bottom, a clear outline emerges: surface emotions are continuously ignited under regulatory and policy narratives, but underlying liquidity is quietly retreating, and leverage risks are beginning to clear locally. The market is in a phase of "plenty of stories but cautious ammunition," with a clear dislocation between the emotional curve and the funding curve.
● Positive Interpretation Tends Towards Speculation: In such an environment, short-term regulatory positives are often more easily interpreted as a "safe speculative window" rather than a "long-term allocation signal." Funds tend to prioritize cashing in on such policy imaginations in high-volatility assets rather than patiently waiting to assess fundamentals after the details are finalized; this not only increases the potential magnitude of bubbles and pullbacks but also makes it difficult for compliant infrastructure projects that truly align with policy directions to gain sufficient valuation premiums in the short term.
● Observation and Divergence: For participants, a more feasible strategy is to anchor on on-chain data and trading volume, splitting the current market into two main lines: one is the "short-cycle game" centered around whale arbitrage, Meme frenzy, and high-leverage speculation, characterized by concentrated holding structures, weak liquidity, and extreme sensitivity to emotions; the other is the "long-term value chain" focused on expansion, settlement, and compliance construction, which has a slower return rhythm but is more sensitive to regulatory trends and institutional capital inflows. In specific decision-making, clearly distinguishing these two narratives is more rational than attempting to play both the speculator and long-term investor roles on the same asset simultaneously.
● Follow-Up Focus: Looking ahead to the next phase, three clues need to be closely tracked: first, how the White House and relevant agencies will translate the current policy directional statements into executable details, and the differentiated impact of these details on different types of assets; second, whether the supply of stablecoins and on-site trading volume will show a phase recovery, indicating whether funds are willing to increase risk exposure again; third, whether leveraged liquidations and whale sell-offs will continue to concentrate and explode or gradually weaken, determining whether this round of liquidity clearing is a one-time shock or a mild, repeated process. In the current environment of coexisting policy warmth and liquidity retreat, patience and data are more decisive than emotion.
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