Background of the big dump in the encryption market

In February 2025, the crypto asset market experienced a major sell-off, with a market value evaporation of over $325 billion. Within just 24 hours, the market lost $150 billion, with mainstream currencies such as Bitcoin, Ethereum, and Solana seeing significant declines. Even without major news events, the sudden drop in market liquidity still led to substantial price fluctuations. This article will analyze in detail the main reasons for the current big dump in the crypto market. As of March 12, 2025, the price of BTC is around $81,000. Please trade cautiously and be aware of the risks.

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The main reason for the big dump of Crypto Assets

1. Bybit hacker incident triggers market panic

On February 21, Bybit exchange suffered a large-scale hacker attack, with the amount of loss reaching a record high. According to the Arkham Intelligence report, the event is referred to as the ‘biggest financial theft in crypto history’, with its impact far exceeding the $611 million hacker incident of PolyNetwork in 2021. As a result, market confidence has been severely damaged, leading to investors withdrawing and exacerbating market selling pressure.

2. Ethereum performed weakly, exacerbating market downward pressure

Ethereum has recently shown weakness, failing to maintain key support levels, further affecting market sentiment. As a core of the DeFi ecosystem and NFT trading, ETH’s weakness often drags down the entire crypto market. Investors’ concerns about its future trend have led to decreased liquidity, exacerbating market selling pressure.

3. Increased volatility in traditional stock markets drags down the trend of Bitcoin.

The correlation between Bitcoin and the traditional financial markets is becoming stronger. Recently, the significant drop in the S&P 500 index led to a synchronous pullback in Bitcoin. The instability of the stock market has made investors more cautious about high-risk assets, further reducing market liquidity.

4. Solana price correction, Memecoin market cools down

During the memecoin frenzy, Solana demonstrated strong upward momentum. However, as market enthusiasm subsided, its price began to decline. The downturn in Solana led to a simultaneous decline in assets within its ecosystem, damaging market confidence and accelerating the overall market correction.

5. Citadel Securities’ entry is interpreted as a ‘sell the news’ event

Citadel Securities announced plans to become a liquidity provider for Bitcoin, but the market reacted negatively to the news, seeing it as a ‘sell the news’ event, further worsening market sentiment.

6. Market risk appetite declines, liquidity decreases

Since 2024, the market’s risk appetite has reached historical highs, but as macroeconomic uncertainty increases, investors are starting to reduce their allocation to crypto assets, leading to a decrease in market liquidity. Historically, the prosperity of the crypto market has been highly dependent on liquidity, and the current environment of reduced liquidity has become a key factor in the market’s downturn.

Future Outlook: Is the crypto market entering a bear market?

Although this round of correction is significant, the market has not entered a long-term bear market. The following points indicate that the market still has the potential for recovery:

• Technical pullback is a normal phenomenon: During the Bitcoin bull market, corrections of more than 10% are very common, and technical pullbacks help the healthy development of the market.
• The long-term fundamentals remain strong: Institutional investors still have strong interest in Bitcoin and Ethereum, and the long-term outlook for mainstream crypto assets remains optimistic.
• The market still has important support: Bitcoin still has buying support at key support levels, short-term fluctuations may occur, but long-term investors are still present.

Note: This article does not contain any financial advice, it is only a personal opinion, not for investment reference, please trade cautiously and be aware of the risks.

Conclusion: The crypto market needs liquidity to thrive

The current big dump in the crypto market is not caused by a single factor, but the result of multiple factors acting together. The Bybit hack, Ethereum weakness, stock market volatility, and other factors combined have led to a decrease in market confidence and liquidity. However, historically, similar market adjustments do not necessarily mean the arrival of a long-term bear market. In the future, the market’s recovery still depends on the restoration of fund liquidity and investor confidence.