Crypto crash and bitcoin

The collapse of Bitcoin is linked to the mismatch between assets and liabilities, similar to the 2008 crisis. The structural risk arises from the use of leverage and tokenized metals. Although forced liquidations threaten the market, signs indicate that a bottom is near.
1. Introduction to Cycles: When the Market “Crashes”
In finance, a “bear market” is not simply a decline in prices. Based on the actual data of a 45% decline from peak levels, we must define this phase as a period of strong structural pressure. It is not only the asset that loses value, but the stability of the system as a whole that is being tested.
Insight for the student: The concept of “mismatch” The reason why large institutions such as Lehman Brothers and Silicon Valley Bank went bankrupt lies in the mismatch between assets and liabilities. In simple terms, this occurs when your “assets” (what you own, such as Bitcoin) lose value or cannot be liquidated immediately, while your “liabilities” (the debts you owe) remain fixed or must be paid off immediately. This balance is the heartbeat of the market: if it breaks, collapse is inevitable.
Understanding this imbalance is key to moving from fear to awareness. However, to understand how this mismatch turns into a systemic collapse, we need to analyze the role of leverage.
2. The Anatomy of a Collapse: Leverage and Liquidations
Why a drop in prices suddenly accelerate into what investor Michael Burry calls a “death spiral”? The cause lies in three structural risk factors that act as panic multipliers:
1. Forced liquidations: Recently, in a single week, over $6.7 billion in leveraged positions were wiped out. When the price falls, those who have traded on debt are forced to sell, fueling a chain reaction.
2. Cross-asset contagion: A new feature of this cycle is the use of Bitcoin as collateral for trading tokenized metals. This creates a dangerous link: weakness in one market forces Bitcoin to be sold to cover losses elsewhere.
3. Treasury company “copycats”: Many companies have tried to imitate industry leaders by using leverage of up to 50%. Such aggressive debt is a ticking time bomb ready to trigger forced liquidations.
To better visualize the vulnerability, let's compare the risk profiles:
Feature
Retail Risk (Small Investor)
Institutional/Banking Risk
Main Focus
Market price and volatility.
Balance sheet structure and stability.
Source of Funds
Own savings (equity capital).
Short-term liabilities (debt).
Collateral and Contagion
None or direct ownership.
Bitcoin used for metals/tokenization.
Breaking Point
Emotional pressure/fear.
Mismatch between assets and liabilities.
Once these structural ruins and “weak hands” have been cleared away From the liquidations, clear mathematical signals are beginning to emerge that indicate the end of the storm.
3. The Master Signal: Convergence between Supply in Profit and Supply in Loss
The most powerful indicator for identifying the bottom of a cycle is not found on the price chart, but in the on-chain analysis of supply:
• Supply in Profit: Quantity of coins worth more than the original purchase price.
• Supply in Loss: Quantity of coins worth less than the original purchase price.
As analysts, we look for the moment of convergence: the intersection between these two curves represents a true “capitulation event.” It is the point of maximum pain where a total market reset occurs.
“Supply in profit is converging with supply in loss, a signal that has historically marked every single Bitcoin bottom in history.”
This intersection is a rare event, typically occurring only once per cycle, and signals that the “purge” phase is complete. Recognizing this moment allows us to transform an emotional decision into a strategic move based on data.
4. Identify Chart Patterns and Balance Sheet Resilience
To navigate the end of a bear market, we must distinguish between those who are destined to fail and those who are built to withstand it. The key example is MicroStrategy's strategy (often referred to simply as “Strategy”). Unlike “copycats” who use 50% leverage, this entity has structured its balance sheet with:
• Zero-interest debt (0%).
• Long-term maturities (until 2028).
This structure makes investors immune to short-term fluctuations. Here is a checklist for students to assess how close they are to the bottom:
1. Convergence check: Have the supply and profit and loss curves crossed?
2. Maturity analysis: Do the big players have debts maturing immediately or do they have breathing room for years?
3. Leverage clean-up: Has the system already “purged” excess leverage through forced liquidations?
Learning to read both sides of the balance sheet is what separates those who suffer from the market from those who ride it.
5. Conclusion: The Golden Rule of the Knowledgeable Investor
The fundamental lesson is that price is only a shadow cast by the underlying financial structure. A 45% decline is a psychological challenge for retail investors, but it only becomes lethal for those who have built their positions on short-term liabilities and fragile foundations. Those who thrive are those who understand that true strength lies not in what you own, but in how you finance it.
Key Message: “Never look at just one side of the balance sheet.”