The recent sharp decline in altcoins may seem sudden, but the underlying logic is quite clear — this is not caused by retail investors, and the timing is definitely not coincidental.

What is the real culprit? Funding rates and leverage.

In recent weeks, the funding rates in the altcoin futures market have surged significantly. What does this mean? It indicates that the market is filled with long positions, and many traders are using leverage. When this situation accumulates to a certain point, even without any bad news, a price decline becomes inevitable. A single feather is enough to break the camel's back.

Once the decline begins, a chain reaction is triggered. Overcrowded long positions start to be liquidated, the liquidations continue to push prices lower, stop-loss orders are triggered in a herd mentality, spot holders react slowly, and finally, panic selling ensues. Then the cycle repeats itself. This is exactly the script currently playing out.

Looking at the data makes it clear. Open interest is shrinking, long positions are being actively liquidated, the shadow of spot buying is nowhere to be seen, and excessive leverage is being forcibly eliminated.

But here’s an interesting twist — most people don’t realize that this is actually a good thing. When everyone in the market is long in one direction, the upside potential is limited. True sustained growth requires first clearing out these overly accumulated risky positions. Mainstream coins like $ETH are facing the same cycle.