Solana-based meme token ACT briefly lost 50% of its value on Binance

What’s new? Analyst Colin Wu drew attention to the fact that on April 1, several altcoins on the largest crypto exchange Binance plummeted in price. Thus, the value of the Solana blockchain-based meme coin ACT, the native token of the decentralized exchange DeXe (DEXE) and the dForce (DF) protocol coin paired with Tether’s USDT stablecoin fell by 49%, 23%, and 16% respectively within 30 minutes.

Source: X.com

What else is known? According to the analyst, the sudden drops, which occurred amid the growth of the broader crypto market, were caused by large sell orders executed in a short time, leading to a significant increase in spot trading volume.

As noted by former FTX community member Benson Sun, the reason is that Binance adjusted the leverage limit for perpetual contracts on ACT and five other altcoins. However, the other tokens mentioned in the updates did not show similarly sharp price declines.

With leverage, only a maximum position of $4,5 million can be opened one-time. That said, some market makers’ positions exceeded the limit and were directly closed at the market price. After the price of the perpetual contract fell, there was a huge price gap with the spot price, which subsequently also fell.

Some community members also speculated that the margin adjustment of perpetual ACT contracts on Binance triggered an unexpected market maker position squeeze. For the ACT token, the market maker is Wintermute.

And an analyst under the nickname The OnchainData Nerd, citing data from the Arkham Intelligence platform, reported that Wintermute sold out a huge amount of ACT tokens on April 1.

Source: X.com

However, Wintermute founder Evgeny Gaevoy noted the firm’s arbitrage activity was not responsible for the recent volatility in the meme token market.

Source: X.com

A trader under the nickname CnmdRain also believes that Wintermute is not involved in the ACT’s fall, and the reason is precisely due to a correction by Binance.

Source: X.com

ACT was in the spotlight during the wave of hype surrounding meme token AI projects on Solana, at its peak, it had a capitalization of over $890 million. The asset was one of the few in the sector to list on Binance. By now, ACT’s capitalization has fallen more than 85% from its peak to $95 million.