Pump in the Dumps; Everyone is Liquidated

Is It Over? Or Are We Back?

• The crypto market has experienced a significant contraction since December, with total market capitalization dropping to $2.95T at the time of writing. 
  • This represents a 24.5% decline from the December high of $3.91T and matches levels last seen at the peak of the 2021 market cycle, effectively erasing months of gains. 
  • However, with the announcement of an upcoming strategic crypto reserve in the US, markets rebounded hard, setting one of the largest single-day gains in crypto at $334 billion. 
• Market sentiment has deteriorated sharply alongside prices, with the Fear and Greed Index registering a reading of 20, placing it briefly in "Extreme Fear" territory, a level last observed during the fall of 2022. 
  • Sunday's sudden shift put the index back at 33, highlighting the volatile nature of crypto markets. 
• Several factors have contributed to the downturn over the last couple of weeks.
  • The Bybit hack triggered widespread unease across the ecosystem, particularly affecting onchain protocols and high-risk assets. 
  • Simultaneously, broader macroeconomic concerns have spilled over into crypto markets, with traditional finance also experiencing volatility. 
  • Perhaps most notably, the market appears to be digesting the reality that many anticipated catalysts for 2024 have already materialized, leaving fewer near-term drivers to sustain momentum.
  • However, all the doom and gloom was dissipated by Trump’s crypto reserve. The news that the US would accumulate crypto seemed to trump all. 
• Off the back of the news, institutional engagement seems ever more bullish for crypto.
  • BlackRock recently announced plans to incorporate its Bitcoin ETF into portfolio allocations, allowing for 1-2% exposure in alternative asset portfolios, a significant step for mainstream adoption. 
  • Additionally, the White House has scheduled a crypto summit in the coming week, potentially signaling continued regulatory clarification. 

Happy Belated Birthday to Pump.fun 

• Trading volume for graduated Pump.fun tokens has declined significantly since the beginning of the year, reflecting both the broader market cooling and evolving trader sentiment. 
  • Daily volumes have plummeted from January peaks of $3 billion to approximately $170 million at the time of writing - a staggering 94% reduction. 
  • This decline coincides with a slowdown in the platform's token graduation rate, which has dropped from 1.85% to 0.83% weekly, indicating fewer new coins are gaining the $100,000 market cap threshold needed to graduate to Raydium.
• The volume contraction points to a potential case of trader fatigue within the Solana memecoin ecosystem. After months of frenzied activity, many participants appear to be growing weary of the space's darker elements. Rug pulls, questionable influencer promotions, and insider trading groups have all contributed to diminished trust in memecoins in general. 
  • As a fun recap, we’ve had presidential coins, influencer coins, TikTok coins, animal coins, and a slew of AI and agentic coins to just scratch the surface. 
  • This phenomenon isn't unique to Pump.fun, as speculative fervor typically gives way to disillusionment when the reality of high-risk trading environments becomes apparent.
• Despite the current downturn, Pump.fun's overall impact since its January 19, 2024 launch remains remarkable. 
  • The platform has generated an impressive $570 million in lifetime revenue in just over seven months, a testament to both the scale of the Solana memecoin phenomenon and Pump.fun's ability to capture value during the height of the frenzy. 
  • Few crypto platforms achieve such revenue figures, particularly in such a compressed timeframe.
• Looking forward, Pump.fun continues to build, recently launching a mobile application and teasing an upcoming native AMM. 
  • These moves suggest recognition that the initial business model may not be sustainable long-term without evolution. 
  • We’re keeping a close eye to see whether Pump.fun can weather the storm or if it requires peak speculative mania to succeed.

I DECLARE BANKRUPTCY (onchain) 

• February saw Ethereum lending markets experience their most significant liquidation event in 12 months, with nearly half a billion dollars in collateral being liquidated. 
  • This represents the second-highest monthly liquidation figure in DeFi history, trailing only the May 2021 market crash when liquidations reached $670 billion. 
  • Unsurprisingly, the surge in liquidations coincided with the broader market decline that saw total crypto market capitalization drop considerably, triggering a cascade of forced position closures.
• The bulk of these liquidations occurred on the two largest lending platforms, Aave and Compound, which together processed the majority of February's liquidation volume. 
  • The platform's liquidation mechanism allows third-party liquidators to repay portions of underwater loans and receive the borrower's collateral at a discount, typically 5-15% depending on the asset, creating a financial incentive for efficient market correction.
• Looking at the collateral composition on Aave provides insight into what assets were likely affected. The platform currently shows significant supply of Ethereum (2.06M ETH, $5.09B), Tether (3.56B USDT), and various wrapped tokens including wstETH, WBTC, and weETH, alongside 3 billion in USDC.
  • These large collateral pools represent the primary assets that borrowers use to secure their loans, and when market values declined sharply, many positions crossed their liquidation thresholds.
• While lending protocols are designed to handle liquidations through automated processes, the scale of February's event highlights how quickly market conditions can deteriorate when broader sentiment shifts. 
  • For borrowers, this underscores the importance of maintaining healthy collateralization ratios with adequate buffers to withstand market downturns.
• Despite the significant liquidation volume, major lending platforms have demonstrated resilience, continuing to function as designed even under stress.
  • This operational stability represents an important maturation point for DeFi infrastructure, showing that these protocols can process large-scale deleveraging events without systemic failure.

I DECLARE BANKRUPTCY (off-chain)

• As the price of BTC and ETH fell by over 18% and 26% at their respective lowest points, Bybit saw a record amount of long liquidations totalling over $1.4 billion for the week.
  • From this, the largest single-day figure came on Tuesday, 25 February, 2025 with over $383 million in long liquidations.
    These represent Bybit’s largest ever single-day and weekly liquidation figures.
  • It is worth noting that the reason for Bybit’s heightened liquidation figures goes beyond prices going down, as they are currently the only notable centralized exchange (CEX) to fully disclose their liquidation data.
  • For context, current publicly displayed liquidation figures on most CEXs are inaccurate and underreported due to API rate limitations, as real liquidation figures can generally be at least 4 times larger than what is reported.
  • Last month, Bybit announced that they would begin to disclose their real liquidation data, and as the price of BTC fell drastically this past week, we are now seeing the result of Bybit’s fully transparent data, hence the comparatively heightened figures.
  • This is further evidenced by the fact that long liquidation figures on other notable CEXs such as Binance, OKX and Huobi were relatively modest and in-line with their previous averages last week.
• Meanwhile, open interest (OI) for Bitcoin and Ethereum futures on Bybit and CME also experienced a significant decline last week.
  • OI on BTC futures on Bybit decreased by over 35% in roughly a week, from $8.5 billion on 21 February to $5.45 billion by 1 March.
  • CME painted a similar picture, decreasing by over 23% in the same period, from $16.93 billion to $12.96 billion in OI on BTC futures.
  • On the other hand, over 41% of OI on ETH futures on Bybit were closed in this period, falling from $3.07 billion to $1.81 billion.
  • Meanwhile, CME saw its OI on ETH futures decrease by over 30%, from $3.2 billion to $2.2 billion.

Coinbase Worldwide

• Coinbase International had a resurgence in February, with the trading volume of its largest market in BTC-PERP having gone up by an average of 56% every week in February 2025.
  • In the last week of January 2025, BTC-PERP volume on Coinbase International totaled $18.3 billion.
  • In the first week of February 2025, this figure totaled $28.8 billion, and then $38.4 billion the following week.
  • In the third week of the month, BTC-PERP volume jumped to $60.2 billion, before a 76% week-over-week leap as the last week of February 2025 saw over $106 billion in trading volume.
• These heightened figures for Coinbase International come after it experienced a fairly subdued period during the final 2 weeks of January 2025.
  • BTC-PERP on Coinbase International saw a total of just $32.9 billion worth of trading volume during the last 2 weeks of January 2025, in which it averaged just $2.7 billion in volume per day during this period.  
  • Though these recent figures have not quite reached the exchange’s record volume figures previously set just a couple of weeks prior in December 2024.