Event Review 🔍

Recently, the ETH market experienced extreme volatility in a very short period, attracting significant attention. Starting at 00:05, the ETH price surged from approximately $2009 to $2123 within one minute, an increase of up to 5.55%, followed by another rapid increase from $2053 to $2125, a 3.48% spike. Continuous reports emerged in the market indicating that some market makers' grid trading strategies had gone awry, leading to an accumulation of abnormal buy and sell orders, which in turn triggered extreme price fluctuations. Meanwhile, on-chain data showed that tens of millions of dollars in Bitcoin and ETH short positions were forcibly liquidated in a short time, continuously impacting market liquidity. This series of phenomena tightened the already sensitive market sentiment, with investors closely monitoring market dynamics in an attempt to capture every short-term signal.

Timeline ⏰

• 00:05: ETH price rapidly fluctuated, with increases of 5.55% and 3.48% within one minute, marking the first instance of extreme volatility in the market.
• 00:17: A flurry of messages indicated that the market makers' grid strategies at exchanges might have deviations, with some reports showing prices briefly falling below the critical $2000 level.
• 00:18: On-chain monitoring data indicated that approximately $90 million worth of Bitcoin and ETH short positions were forcibly liquidated, leading to a sharp decrease in liquidity.
• 00:19-00:20: Traders reported second-level price fluctuations, with a significant increase in market turnover and noticeable abnormal volatility.
• 00:25: Further data showed that over $100 million in short positions were liquidated in the past hour, exacerbating market uncertainty.
• 00:30: ETH price quickly fell back to around $2055, but volatility remained intense, with second-level trading oscillating between $2030 and $2060.
• 00:32-00:34: The market exhibited a "wicking" phenomenon, with minute price fluctuations exceeding 3% during certain periods, as arbitrageurs capitalized on strategy errors for short-term gains.

Cause Analysis 🔎

The extreme volatility in ETH prices can be attributed to two main influencing factors:

1. Abnormal Automated Market Making Systems and Grid Trading Strategies
   Multiple exchanges rely on programmatic market making and grid algorithms to assist in liquidity management. However, when these systems are improperly configured or malfunction, they can rapidly accumulate abnormal orders, causing prices to be significantly pushed up or down in a short time. Some market reports explicitly mentioned that algorithms from certain institutions and market makers had deviated, leading to a flood of second-level orders into the order book, exacerbating price volatility.

2. High-Leverage Positions Triggering Liquidation Waves and Liquidity Shifts
   Near critical price levels, high-leverage traders were forced to liquidate, triggering a chain reaction. The forced liquidation of a large number of short positions not only released a significant volume of orders but also quickly consumed market liquidity, further amplifying the already sensitive market conditions. This forced reduction in positions under high leverage created a "crash" effect on the market in the short term, further increasing price instability.

Technical Analysis 📊

Based on the [ETH/USDT Binance USDT perpetual 45-minute] candlestick data, the current technical indicators present mixed signals:

• KDJ Indicator
• A golden cross has appeared, indicating potential upward momentum in the short term. However, the convergence of the KDJ indicator also suggests that the current trend is not continuing significantly, heightening market hesitation.
• OBV Indicator
• It has broken through previous highs, showing that buying power is gradually strengthening, which provides some support for the market.
• Volume Situation
• Trading volume shrank to an average of 28.66%, reflecting a temporary decrease in market interest; however, the trading volume on the 10-day and 20-day moving averages increased by 109.99% and 83.51%, respectively, indicating a rise in trading activity in the short and medium term.
• Candlestick Patterns
• The appearance of a doji suggests that the market is in a state of indecision, potentially leading to a trend reversal; simultaneously, the shooting star pattern indicates significant bearish pressure in the short term. The consecutive appearance of three rising soldiers further proves that if resistance levels can be effectively broken, the market may see a strong rebound.
• Moving Average Position
• The price is currently supported near the MA20, but is below the EMA120, indicating that the ultra-long-term trend remains bearish; at the same time, the price is above the EMA24/52, showing an overall upward trend, and the EMA24 is above the EMA52, suggesting that there is still a positive sentiment in the medium to long term.

Market Outlook 🚀

In the face of such extreme and complex market fluctuations, the market outlook is filled with uncertainty. In the short term, due to the dual effects of abnormal automated market making systems and high-leverage position liquidations, ETH may continue to hover around the $2030 to $2060 range, with significant trading volatility.
In the medium term, if the issues with grid strategies are alleviated and market liquidity returns to normal, coupled with support from certain technical indicators (such as OBV and the three rising soldiers pattern), a reversal trend may emerge. However, the ultra-long-term trend still needs to pay attention to the downward pressure reflected by the EMA120, while macroeconomic and policy news may also have a lasting impact on market sentiment.

For investors, maintaining risk control and capital management is crucial. In high-frequency fluctuations, short-term traders can look for pullback opportunities to capture swing profits, while medium to long-term investors should closely monitor technical indicators and on-chain capital dynamics, strategically position themselves, and guard against potential gaps and crash risks.

In summary, the ETH market is currently at the center of a storm of algorithm failures and high-leverage liquidations, where investors must be wary of the severe risks posed by short-term fluctuations while seizing opportunities to capture potential structural reversals after market adjustments. Market sentiment remains volatile, and rational judgment and cautious operations are key to weathering the storm.

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