Ethereum News Today: Excess Leverage and Retail Frenzy Could Trigger 50% Crypto Crash

Alliance DAO co-founder QwQiao has issued a stark warning that the next crypto bear market could be far more severe than anticipated, driven by excessive leverage and the influx of inexperienced investors. In a November 21 post, QwQiao argued that a "large cohort of dumb money" buying spot assets and ETFs without understanding the risks could lead to a 50% drawdown before the market resets for a new bull cycle. His comments align with broader industry concerns about structural weaknesses, including accelerating outflows from major ETFs like BlackRock's IBIT.

The cautionary message gained traction as Placeholder partner Chris Burniske echoed QwQiao's views, stating the "DAT era" of forced selling has only just begun. DATs-Decentralized Autonomous Tokens tied to creator or attention-based economies-have surged this year but are now seen as vulnerable to a sharp reversal. Burniske noted that the "Friday massacre" in October, which saw $20 billion in crypto positions liquidated, marked the start of a painful capitulation phase.

Market data supports these concerns. DefiLlama reported a 82% drop in DAT inflows to $1.93 billion in October, down from $10.89 billion in September. November is on track to be the weakest month for DAT inflows in 2025, with only $505 million recorded as of the time of writing. BlackRock's IBIT ETF, a key indicator, has shed $2.47 billion in November amid record outflows, reflecting waning confidence in crypto's current trajectory.

The warnings have sparked debate within the crypto community. While some investors agree that inexperienced buyers often panic-sell during volatility, others argue the term "dumb money" oversimplifies the maturation of the market. Meanwhile, Ethereum's price struggles further underscore the fragility of the current cycle. FG Nexus, an Ethereum treasury firm, sold nearly 11,000 ETH to fund share buybacks, highlighting the pressure on digital asset treasuries (DATs) as crypto prices weaken.

Broader macroeconomic factors also loom. Japan's approval of a $135 billion stimulus package in November has not offset ongoing market declines, with Bitcoin dipping below $85,500-a 7% drop in 24 hours and a 20% decline over the past month. Ark Invest, meanwhile, has taken a contrarian stance, investing $40 million in crypto stocks like Bullish and Circle as their shares fell, signaling a belief in long-term value despite short-term pain.

QwQiao's warnings fit into a larger narrative of caution among seasoned investors. He has previously emphasized the need to flush out excess leverage and retail speculation before a sustainable bull cycle can resume. With macro uncertainty persisting and ETF outflows accelerating, the market may face a deeper correction than many expect. As Burniske noted, "just as it rose all the way", "it will now fall all the way".