Written by: Haotian

To be honest, the black swan event on October 11th made me, an originally optimistic industry observer, feel a hint of despair.

I had originally understood the current "Three Kingdoms" situation in the crypto industry, thinking that while the big players were fighting, retail investors could just grab a bit of profit. However, after experiencing this bloodbath and peeling back the layers of its underlying logic, I realized that it was not the case.

To put it simply, I thought the tech enthusiasts were innovating, exchanges were driving traffic, and Wall Street was laying out capital, with each party playing their own game. We retail investors just needed to seize the right moment, ride the wave of technological innovation, and jump on the hot trends when the funds came in, ensuring we could always get a share of the profits.

But after the bloodbath on October 11th, I suddenly realized that these three parties might not be in orderly competition at all, but rather in a final harvest of all the liquidity in the market?

First Force: Exchanges monopolizing flow, vampires holding traffic and liquidity pools.

To be honest, I used to think that exchanges just wanted to build large platforms, increase traffic, and create a big ecosystem to make money. However, the incident with USDe's cross-margin leading to a series of liquidations exposed the helplessness of retail investors under the rules defined by the exchanges. The leverage levels and unclear risk control capabilities that the platforms enhanced to improve product service experience are actually traps for retail investors.

Various rebate activities, Alpha, MEME launchpads, various financial cycles, and high-leverage contract plays are emerging one after another. It seems to provide retail investors with many opportunities to make money, but once the exchanges cannot handle the risks of on-chain DeFi liquidations, retail investors will also suffer the consequences. Life is tough.

What’s terrifying upon reflection is that the top 10 exchanges had a trading volume of $21.6 trillion in Q2, yet overall market liquidity is still declining. Where is the money going? Besides transaction fees, there are also various liquidations. Who is siphoning off the liquidity?

Second Force: Wall Street capital, entering the market under the guise of compliance.

I was initially very hopeful that Wall Street would enter the market, believing that institutional funds could bring greater stability to the market. After all, institutions are long-term players and can inject incremental capital into the market, allowing us to enjoy the industry dividends of Crypto merging with TradFi.

However, just before this crash, I saw news of whales accurately shorting for profit, and before the crash, several wallets suspected to be linked to Wall Street opened huge short positions, making hundreds of millions in profit. There are many similar reports that read like insider information, but occurring during such a moment of panic makes one question why institutions always seem to gain an advantage in "front-running" before black swan events happen?

These TradFi institutions, under the banner of compliance and bringing in capital, what are they actually doing? Binding DeFi ecosystems with stablecoin public chains, controlling capital flows through ETF channels, and gradually encroaching on the market's discourse power with various financial tools? On the surface, they claim it’s for industry development, but in reality? There are too many conspiracy theories about the Trump family profiting that I won’t delve into.

Third Force: Tech natives + retail developers, caught in the crossfire.

I think this is where most retail investors and developers, the so-called builders, truly feel despair. Since last year, many altcoins have been knocked down, but this time they have directly plummeted to zero, forcing people to face the facts that the liquidity of many altcoins has nearly dried up.

The key issue is that there are a lot of infra tech debts, and the application landing is below expectations. Developers are struggling to build, but what’s the result? The market simply doesn’t buy it.

Therefore, I cannot see how the altcoin market will rise again, nor can I understand how these altcoin projects will compete with exchanges for liquidity or how they will match Wall Street institutions in pulling power. If the market doesn’t buy the narrative of storytelling, and if the market is left with so-called MEME gambling, it will be a decisive clearing and reshuffling for the altcoin market, with developers fleeing and the structure of market participants being reshuffled. Is the market destined to return to nothingness? Sigh, it’s too difficult!

So…

Saying too much only brings tears. If the current "Three Kingdoms" situation in the crypto industry continues, with exchanges monopolizing and draining liquidity, Wall Street precisely harvesting profits, and retail tech enthusiasts being double-killed, it will undoubtedly be a catastrophic blow to the past cyclical gameplay of Crypto.

In the long run, the market will only leave a few short-term winners and all long-term losers.

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