Willy Woo: Poor Crypto Market Performance Traced to FTX Liquidation Mechanism, Perp Arb Strategy Trend Continues to Unleash Selling Pressure

BlockBeats News, March 26th, Cryptocurrency analyst Willy Woo stated that the current market sentiment is low, and altcoins are performing poorly overall. The core reason can be traced back to the asset liquidation mechanism of "Collateral Token Fire Sale Overlay Futures Hedging" born after the FTX bankruptcy. During the FTX liquidation process, a large amount of locked SOL was sold under a "payment first, delivery later" agreement, usually at over 60% discount due to limited liquidity. Some hedge funds bought in and hedged the price risk through the futures market, overlaying the staking rewards and basis returns to achieve nearly 70%–80% of almost risk-free returns.

This strategy later spread throughout the industry, with many project teams and their foundations selling locked tokens in advance to hedge funds. The latter hedged through the derivatives market and released selling pressure, making it difficult for retail investors to obtain excess returns. This became an important reason for the poor overall performance in this cycle, indicating that the anticipated future unlocking selling pressure of some projects has been digested early. In the next bull market, the actual selling pressure may be lower than expected. Retail investors find it challenging to gain an advantage in the crypto market, so it is recommended to focus on core assets such as Bitcoin.