Bitcoin fluctuates at high levels, the ALPACA incident reveals market manipulation risks.

This week, the crypto market is showing a high-level fluctuation, with Bitcoin's price fluctuating between $93,500 and $95,500. Some alts like the SUI ecosystem, Virtual ecosystem, and AI-related Tokens have performed well. The market as a whole is still waiting for key economic data such as unemployment rate and non-farm payrolls this week to determine the direction of the trend.

The crypto market has recently presented a complex situation. The ALPACA incident revealed that some institutions profit by manipulating low market cap Token contracts, utilizing short squeezes and funding rates, highlighting the speculative risks of the market. At the same time, the U.S. policy stance towards crypto assets has become increasingly positive, with Arizona's passage of the Bitcoin Reserve Bill marking an acceleration in the mainstreaming process of cryptocurrencies.

The ALPACA incident demonstrates the manipulation strategy of the market makers: first, they control the supply to stabilize the price and complete the contract delivery, then attract short sellers into the market before driving up prices to harvest profits, and finally, after the delivery, they gradually dump the assets to cash out. In this process, short sellers become the "fuel" that drives the price increase, as they need to pay negative funding rates to the long positions. The market makers use these funds to continue buying spot, creating a cycle of price increases.

The strategy combining low market capitalization, open interest (OI), and funding rates can identify potential market manipulation: focus on coins with a market capitalization of less than 100 million USD, and observe whether their OI is significantly higher than the market cap or suddenly fluctuates greatly. A surge in OI along with a positive funding rate may indicate that the market maker is going long, while a surge in OI with a negative rate should raise caution.

In terms of policy, ProShares' XRP futures ETF has been approved for listing, but not the spot ETF that the market expected. The SEC has delayed the approval decisions for several spot crypto ETFs, which are expected to be completed by June 2025. Industry insiders are optimistic about the approval prospects for most crypto ETFs.

The "Strategic Bitcoin Reserve Act" passed by Arizona allows the state government to invest a portion of public funds in Bitcoin, reflecting the trend of cryptocurrency mainstreaming. This law may inspire other states to accelerate similar legislation, but it still requires the governor's signature to take effect. Regardless of whether the law is ultimately passed, the trend of Bitcoin reserves in U.S. states has already begun, and we may see more related bills enacted in the next two years.