Spot dumping, contract harvesting: In-depth analysis of TST "long positions squeeze" death spiral

Written by: Oliver, Mars Finance

On the morning of August 7, 2025, as Asian traders just opened their screens, a chill penetrated the summer's dullness. A cryptocurrency token named Test (TST) saw its candlestick chart plummet like a cliff, dropping vertically from a warm $0.0496 to a cold $0.01547 in just one hour, a decline of nearly 70%. Panic spread through the market like a plague, with the TST/USDT trading pair on Binance contributing an astonishing $15.95 million in trading volume during the crash.

However, the protagonist of this bloody massacre is not a certain star public chain or DeFi giant. Its name - "Test" - is like a dark humor that reveals the absurd nature behind this storm. This is not an accident, but a textbook-style "contract strangulation" directed by human greed, algorithmic ruthlessness, and structural flaws in the market.

The absurd origin of TST: A one-man show that became an unexpected hit.

TST did not originate from a grand technological vision or a rigorous white paper. Its life began with a tutorial video from the BNB Chain team. To demonstrate how their Meme token issuance platform "four.meme" works, the team created this sample token called "Test". A casual act, yet due to the accidentally leaked contract address in the video, this specimen, which should have remained in the laboratory, was thrust onto the bustling stage by speculators.

"Related to Binance/BNB Chain"—this vague yet highly enticing label became the fuel for TST's price surge. In the crypto world, narrative often matters more than reality. The community and sharp-eyed KOLs (Key Opinion Leaders) quickly seized this story and packaged it as a "community-driven" meme miracle. Discussions about TST went viral on social media in no time. Many investors didn't even know its origin; they only knew it was a "value gap" related to the giants.

This is a classic portrayal of the Meme token "Attention Economy". Its value does not stem from technology or application, but from the sum of community sentiment and social media hype. As an analysis by Gate pointed out, the price curve of such tokens follows a predictable lifecycle: "Hype - Surge - Consolidation - Crash". After TST was listed in early February 2025, its price soared by 1100%, perfectly illustrating this cycle. However, when the attention recedes, the castles built on quicksand will inevitably collapse; it's just a matter of time. Former Binance CEO Zhao Changpeng (CZ) personally clarified that TST has no direct connection with the official entity, but this faint voice of reason has long been drowned out by the fervent noise of the market.

"The Start of the "Meat Grinder": Reviewing that Thrilling Hour"

The flash crash on the morning of August 7 was not merely a market panic, but more like a precise surgical operation. The core of this operation is the "spot market dumping and contract explosion" linkage mechanism.

Step One: The probing of the whales and the resonance of algorithms.

The storm begins with a small disturbance. On-chain data shows that TST's chips are highly concentrated, with a few "whale" addresses holding enough tokens to shake the market. On the eve of the crash, it is likely that one or more giant whales decided to end this game. They began to continuously sell on the spot market, taking advantage of the already fragile liquidity of TST on decentralized exchanges (DEX) like PancakeSwap - previously, its liquidity pool totaled only about $3.3 million - creating the first wave of price decline.

The first wave of selling pressure was like a stone thrown into a calm lake, stirring up violent ripples. A large number of high-frequency trading (HFT) algorithms lurking in the market were instantly activated. When the price fell below a certain key technical support level, these preset programs automatically executed stop-loss and liquidation orders. X platform user @bitfoxdotai analyzed afterward: "Cascading long liquidations led to liquidity exhaustion." This accurately described the situation at the time: the cold execution of machines replaced human hesitation, and the selling pressure was geometrically amplified, forming a ruthless algorithmic echo chamber.

Step 2: The ultimate harvesting of the contract market.

If the sell-off in the spot market is the fuse that ignites the explosion, then the real powder keg is the highly leveraged derivatives market. Within 24 hours of the flash crash, the trading volume of the TST/USDT contracts across the network reached an astonishing $266 million, an increase of 1173%. The growth rate of contract trading volume on Binance was even more jaw-dropping at 1855%. Behind these cold numbers lies the tragic song of countless leveraged long positions.

This is a typical "Long Squeeze." The manipulators create a price drop in the spot market, with the real goal of triggering the long positions that are chasing the price up in the futures market. When the spot price hits the "liquidation line" of these positions, the exchange's risk engine automatically sells their positions at market price to recover margin. This new, large batch of sell orders passively crashes into the market, causing the price to drop further, thereby triggering more and lower-priced long liquidations.

This is a self-reinforcing death spiral. The total contract positions across the network plummeted by 28.86% within that 24-hour period, meaning nearly one-third of leveraged positions in the market were liquidated in agony. The trading analysis application @AlvaApp on platform X commented: "The MACD indicator confirmed risk-averse sentiment, and leverage was liquidated." The contract market of TST turned into an efficient "meat grinder" that morning.

Reflections on the Ruins: Systemic Fractures from TST

The tragedy of TST lies in the fact that it is not an isolated performance. Shortly after the flash crash occurred, a screenshot from X platform user @btc_btceth was widely circulated in the community. The image displayed the K-line charts of $TST, Banana, and Broccoli, three Meme coins on the BNB chain, side by side, showing an astonishingly consistent trend— all exhibiting a nearly 90-degree vertical crash. The poster couldn't help but raise an intriguing question: "Did they seem to know some news in advance, or is there an internal anti-corruption campaign starting within the Binance chain?"

The speculation about "internal anti-corruption" may be difficult to verify, but this image undoubtedly reveals a more disturbing truth: the collapse of TST is likely just the tip of the iceberg in a coordinated action or cascading failure within the BNB Chain Meme coin ecosystem. This is no longer just a problem of a single project, but rather a concentrated exposure of systemic cracks throughout the entire ecosystem.

First, it exposes the B-side of "low-threshold innovation." The four.meme platform of BNB Chain is intended to lower the threshold for token issuance and stimulate grassroots innovation. However, this convenience also means a lack of risk control. When a token with no actual value and poor liquidity management can be easily created and pushed to the market, it leaves a huge backdoor for potential manipulation. And since there can be a TST, there can naturally be countless "Banana" and "Broccoli" waiting to be harvested using the same methods.

Secondly, it has once again sounded the alarm for DEX liquidity. Decentralized exchanges bring the freedom of permissionless trading, but they often come with the problem of insufficient liquidity depth. For assets like TST, which have a small market cap and shallow trading depth, a large order from a whale can be enough to collapse the entire buy side. When this risk exists simultaneously across multiple tokens, the collapse of any single point may trigger a chain reaction across the entire sector due to the contagion of market sentiment.

On a deeper level, we can see the echoes of history. Despite the more complex mechanisms, the epic collapse of LUNA/UST in 2022 is fundamentally a system with internal mechanism flaws that fell into an inescapable death spiral under external pressure. Whether it is the decoupling of algorithmic stablecoins or the contract strangulation of Meme coins, they all point to a common tragedy: when the value of an asset relies entirely on fragile consensus rather than solid value support, its collapse is inevitable; it is just a matter of time and manner.

Conclusion: The absurd play ends, the warning bell tolls.

The story of TST begins with an unexpected teaching incident and ends with a market massacre, filled with absurd drama. In the most tragic way, it provides a public lesson on risk for all market participants.

The core of this lesson is: when a meme concept with no intrinsic value meets a high-leverage derivatives market that can infinitely amplify risks, what they create is an extremely unstable financial "explosive device." For ordinary investors, trying to build wealth on this quicksand is no different from seeking skin from a tiger.

In the end, what this farce leaves us with, apart from the shocking scar on the K-line chart, is the slightly sarcastic response from former CEO Zhao Changpeng—he denied any direct connection to the project. The creators have long since left the scene, but the monster that the market has birthed has indeed devoured the hard-earned money of countless individuals. The bell for TST has already tolled, warning future participants that in the pursuit of the next hundredfold coin myth, they must clearly see beneath their feet, whether it is solid ground or an abyss.