ACT plummets, Wintermute exits: Who is paying for junk assets?

Author: Scof, ChainCatcher

Editor: TB, ChainCatcher

On April 1, multiple low market cap tokens collectively crashed on the Binance platform, with ACT dropping as much as 55%. This sudden drop triggered widespread discussion in the community and brought to light the deep-seated contradictions hidden beneath the surface of the crypto market.

The On-Chain Truth Behind the Crash ?

The market initially focused on the market maker Wintermute. On-chain data shows that before and after the crash, Wintermute gradually liquidated several altcoins, including ACT, DEXE, HIPPO, KAVA, among others, which were the hardest hit in this round of decline.

Although Wintermute's founder responded that the sell-off was to arbitrage price anomalies in the AMM pools and that the actions occurred after significant price fluctuations, not as an active market dump, the timing of these fund withdrawals highly coincided with the crash.

As a leading market maker in the industry, Wintermute's basic profit model relies on high-frequency market making and cross-market arbitrage to maintain liquidity and capture price differentials. In a normal market, it provides buy and sell depth while stabilizing prices. However, in extreme market conditions, its strategy may shift to actively withdrawing liquidity or even liquidating positions for profit maximization due to risk control, which on the surface appears similar to "market dumping."

Binance's Risk Control Logic and Strategic Game

Meanwhile, Binance's contract adjustments also became a core trigger for this incident. At 15:32 on April 1, Binance announced that it would lower the maximum position limits for several USDT-denominated contracts, including ACT, starting at 18:30 that day. For ACT, the position limit was reduced from $4.5 million to $3.5 million. This means that all positions exceeding the new limit would be forcibly reduced or directly liquidated at market price.

It is noteworthy that this was the third adjustment of the contract parameters for ACT within just four days.

On March 28, the leverage limit was reduced from 25x to 10x; on March 31, the maximum position was lowered from $9 million to $4.5 million; and on April 1, it was further reduced to $3.5 million. Such frequent adjustments are unusual, and combined with market data, it can be inferred that Binance may have sensed that unverified and unregistered large holders had accumulated substantial positions in the ACT contract, posing a risk of liquidation due to insufficient market depth.

This is also a common "bubble-popping" mechanism in contract risk control: guiding risky positions to clear by lowering limits to avoid significant losses to the insurance fund during extreme market fluctuations. From subsequent data, it can be seen that the open interest in the ACT contract plummeted by 75% during the adjustment period, and Binance's insurance fund indeed suffered a loss of about $2 million.

However, this technical operation for risk prevention quickly evolved into a chain reaction in the currently extremely fragile Meme ecosystem.

Responsibility Fog in Multiple Responses

The ACT project team also spoke out after the incident, stating that the price fluctuations were "completely out of control" and promised to release a post-event review report once the dust settled.

As the situation developed, multiple parties involved were trying to "clear" their responsibilities, but the truth may not be singular. Binance emphasized that the drop was caused by users selling $1.05 million worth of ACT in a short time; Wintermute stressed it was an arbitrage action rather than a market dump; users accused the exchange of not adequately communicating the rule changes in advance, while the project team maintained a tactically calm response.

Regardless of which party is involved, the structural issues exposed by this sudden event are more worthy of attention. The most core contradiction in the crypto market currently is the opposition between the rapid collapse of junk assets and the harm to user interests. The large presence of fast-food assets like Meme is essentially a game of speculation driven by emotions. They lack fundamental support but enter mainstream trading platforms through listing, hype, and community operations.

In the Era of De-Bubbling, Who is the Sacrificed Party?

As a leading matching platform, Binance finds itself in a dilemma. On one hand, it must ensure systemic safety and prevent chain liquidations caused by low liquidity assets; on the other hand, it also bears the trading freedom and asset confidence of its users. In certain extreme cases, its risk control actions can trigger price cascades, thereby harming user interests. This balancing act under dual pressure is the "role paradox" currently faced by platforms.

The role of market makers is equally complex. They are both providers of market liquidity and the first players to withdraw during extreme market conditions. When their strategies shift, ordinary investors often remain unaware and find themselves deeply trapped.

More realistically, when junk assets are cleaned up, there will always be those who profit from the chaos—whether it be institutions that identify risks and withdraw early or strategy accounts that arbitrage on volatility. De-bubbling and risk squeezing are essential phases for a healthy market, but when this mechanism lacks transparency, it can lead to a crisis of trust.

Ultimately, this ACT incident is not just a crash of assets but a mirror reflecting the deep institutional dilemmas of the current crypto market.

In a rapidly evolving market, platforms, project teams, market makers, and users are not isolated roles; the stability of the system depends on the dynamic balance among all parties. Without sufficient mechanisms to coordinate the tensions between "value" and "liquidity," "clearing" and "protection," any small-scale risk control operation could evolve into a systemic trust collapse.

And in the end, every participant in the market will bear the costs of this.