Source: Cointelegraph Original: "{title}"
Update (April 2, 2:30 PM): This article has been updated to include Binance's statement regarding the investigation into the volatility of Act I The AI Prophecy (ACT) tokens.
On April 1, April Fool's Day, various altcoins and meme coins experienced significant sell-offs, with tokens like Act I The AI Prophecy (ACT) plummeting nearly 60% within minutes.
According to data from CoinMarketCap, on April 1, the price of the AI-related project Act I The AI Prophecy (ACT) dropped from $0.19 to $0.08, a decline of 58%, resulting in a market cap loss of $96 million in less than an hour.
The drop in ACT was accompanied by an overall decline in the altcoin market. Meme coins such as sudeng (HIPPO), CZ’S Dog (BROCCOLI), Kishu Inu (KISHU), DeXe (DEXE), and dForce (DF) also saw significant price drops.
Cryptocurrency market overview. Source: Coin360
Despite the panic in the altcoin market, the broader cryptocurrency market remained unaffected. As of the time of publication, major cryptocurrencies like Bitcoin (BTC) continued to trend upward.
The crash of the ACT token garnered widespread attention on social media, with the Act I project team addressing the community on the X platform, assuring them that they are fully aware of the current situation.
“Our team is actively investigating and working with all relevant parties to resolve this issue,” the Act I team stated, adding that they have begun formulating a "response plan" with trusted partners.
Source: Act I The AI Prophecy
Some cryptocurrency commentators linked the sudden price volatility of the ACT token to Binance's margin adjustments.
According to blockchain analysis tool Lookonchain, Binance updated the leverage and margin levels for tokens like ACT on April 1, leading to large-scale liquidations of some whale accounts.
“Binance updated the leverage and margin levels for tokens like ACT, resulting in a whale account being liquidated at a price point of $0.1877, amounting to $3.79 million,” Lookonchain wrote in a post on the X platform.
Source: Lookonchain
According to a blog post from Binance, its derivatives platform Binance Futures updated the leverage and margin levels for trading pairs, including ACT against USDT, at 6:30 PM that day.
Binance noted that this update affected existing positions opened before the update, which could lead to some positions expiring.
Binance subsequently released an announcement regarding the ACT issue around 1 AM the following day, reporting that “three VIP users sold approximately $514,000 worth of ACT tokens on the Binance spot market.”
The announcement also mentioned another sale of ACT by a non-VIP user, valued at approximately $540,000, and added that the exchange “did not find any single account that made significant profits from this incident.”
Binance's preliminary investigation summary on low market cap token price volatility. Source: Binance
Additionally, Binance emphasized the role of market makers (MM) in its ecosystem and stated that it would continue to adjust leverage settings for different trading pairs based on market conditions.
The decline in the altcoin market occurred amid speculation within the community regarding the global algorithmic trading firm Wintermute's selling behavior. It was reported that Wintermute liquidated multiple altcoin positions on April 1.
Some market observers even speculated that the sell-off could have been due to a hacking incident, while many expressed confusion over the fundamental reasons for the sale.
DEFI Kadic stated on social media: “Market makers do not destroy their books for no reason. It’s either a hack, bankruptcy, or someone faced severe margin calls.”
Some also speculated that Wintermute might have interacted with the USD1 stablecoin launched by World Liberty Financial, associated with Donald Trump.
Source: Daniele (Degen Arc)
One X user remarked: “This could be a significant deal for them as they are reducing the risk of all assets that may not align with the new brand direction or cannot match their institutional player positioning.”
However, Wintermute co-founder and CEO Evgeny Gaevoy denied the company's involvement in the altcoin crash on April 1. In a social media exchange with X user ilikeblocks, Gaevoy stated:
“This is not our doing (believe it or not), but I am curious about the follow-up investigation into this incident.”
Source: ilikeblocks and Wintermute co-founder and CEO Evgeny Gaevoy
ilikeblocks later posted to express regret for his initial accusations against Wintermute.
He added: “They have made the market better for all of us, and compared to their competitors, they are really not that opaque.”
Cointelegraph reached out to Wintermute for comments on market behavior but had not received a response by the time of publication.
Related: Movement Network to repurchase tokens with $38 million recovered from bad market makers.
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