One Hundred Ten Million Dollar Liquidation Blood Lessons: Why Do You Keep Going Long at Highs?

The crash on June 4th wiped out $1.1 billion across the entire network. Every time I see such data, I ask myself: why are the same people always getting hurt? Reflecting on the market sentiment before this decline, the answer is very clear.

A week before ETH dropped to $1,800, social media was filled with optimistic comments, and many traders opened high-leverage long positions. They ignored a fundamental indicator: open interest and funding rates. From June 1st to 3rd, ETH's contract open interest hit new highs for three consecutive days, while the price remained stuck in the $1,900-$1,950 range. This is a classic "volume-price divergence"—open interest increasing, price not rising, indicating bulls are accumulating but lacking new buying volume. Meanwhile, funding rates surged from 0.01% to over 0.02%, meaning longs had to pay high holding costs. Once this structure encounters negative news, it can trigger chain liquidations.

So how should we avoid becoming "fuel"? Three iron rules:

First, never open longs when open interest hits new highs and the price is sideways. This indicates that the battle between bulls and bears is about to be decided, and the winner is often not the retail crowd.

Second, if the funding rate exceeds 0.01% for more than three days, halve your leverage or close your positions. High funding rates are a warning of crowded longs, not a sign of "market confidence."

Third, after every crash, do not rush to buy the dip immediately. First, wait for the liquidation balance curve to stabilize. Liquidations are chain reactions, often wave after wave. Wait until hourly large liquidations no longer appear, then it’s a safer entry point.

Returning to the current market: the $1.1B liquidation has released a lot of risk, but the inertia-driven decline may not be over yet. Do nothing in the next 24 hours, just observe the chart. When ETH approaches $1,700 with a volume spike and a long lower shadow, then try a 10% position to cautiously go long.

#ETH drops more than 5%
$ETH