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The truth behind the Bitcoin crash
Let's sort out the reasons for the Bitcoin crash, which can be divided into the following aspects:
Core Trigger: Reversal of Macro Expectations, Panic over Liquidity Tightening
This is the most fundamental and direct reason.
1. The Federal Reserve's hawkish shift, expectations for interest rate cuts sharply cool:
· Key figures speak out: Federal Reserve Governor Barr (the top regulator) and other important officials collectively shift to a hawkish stance, emphasizing that inflation remains high (3%), far from the 2% target, and must be "cautious." This directly undermines the market's optimistic expectations for continued rate cuts in December.
· Data support: The delayed September non-farm payroll data showed that new jobs far exceeded expectations (119,000 vs expected 50,000), indicating that the economy still has resilience, giving the Federal Reserve the confidence to "not rush to cut interest rates." Although the unemployment rate has risen, it is mitigated by the strong new job data.
· Market expectations reversed: According to the data you provided, the probability of a rate cut in December plummeted from 80% to 40%. This means that the "easing expectations" previously priced by the market have been completely overturned.
2. High interest rates will last longer: Federal Reserve officials (such as Harmack and Schmidt) have made it clear that the financial environment has become too loose, and lowering interest rates now would be like pouring gasoline on the inflation fire. This means that "high interest rates will last longer," which is a deadly blow to liquidity-driven risk assets (such as U.S. stocks and cryptocurrencies).
In simple terms: the market was originally enjoying the "sweetness of rate cuts," but now the Federal Reserve has suddenly taken away the sweetness and told you that the "bitter medicine (high interest rates) still needs to be taken." This has caused global risk assets (from US stocks to cryptocurrencies) to collectively sprint from the "KTV" to the "ICU."
Amplifiers and structural risks within the crypto market
The macro environment is the "wind", while the fragile structure within the crypto market is the "fire". The wind fuels the fire, resulting in a crash that far exceeds other markets.
1. Leverage liquidation chain explosion (Killer: high multiplier contracts):
· The "900 million dollars evaporating overnight" and "high-leverage contract chain liquidation" that you mentioned are the core mechanisms. In the early stage of a decline, high-leverage long positions are forcibly liquidated, and these liquidations themselves become the driving force for further price drops, triggering a chain reaction of lower price liquidations, forming a "downward vortex."
· Market liquidity (order book depth) becomes very thin during panic, and large sell orders can easily cause a sudden price crash.
2. Institutional Strategy Failure and Capital Flight (Killers: ETF Betrayal & Basis Trading Collapse):
· Spot ETF fund outflow: The US Bitcoin spot ETF has recently continued to experience net outflows, indicating that institutional funds are withdrawing. This is no longer a "narrative-driven" buy, but a "reality-driven" sell, which has a huge impact on market confidence.
· Basis trading (Cash and Carry) closing: This is a very professional but crucial point. The "institution buying ETF while shorting futures" you mentioned is a typical basis arbitrage strategy. When the price difference (basis) between futures and spot narrows or even inverts, this strategy becomes unprofitable, and institutions will simultaneously close their long ETF positions and short futures positions. Closing short futures requires "buying," but closing long ETFs is "selling." In a panic environment, the selling pressure from the latter far exceeds the buying support from the former, leading to an accelerated decline.
3. Whale Sell-off and Profit Taking (Killer: Whale Turnaround):
· At high price points (such as above $80,000), long-term holders (whales) and miners will have strong motives to take profits.
· The "brutal truth of tax season" that you mentioned is also a factor (especially for U.S. investors), selling before the end of the year to realize capital gains or losses is a common tax planning strategy.
4. Market Sentiment and FOMO (Fear of Missing Out):
· When a crash begins and the fear index soars, ordinary retail investors will develop a mentality of "if I don't run now, I'll lose everything," which leads them to join the selling frenzy, resulting in a stampede.
Summary
The fundamental reason for the recent plunge in Bitcoin is that the hawkish shift of the Federal Reserve has led to tighter liquidity expectations for global risk assets, while the extremely high leverage and structural strategies (such as basis trading) within the crypto market have amplified this macroeconomic shock several times, ultimately evolving into a brutal deleveraging process.
In summary: This is not the failure of cryptocurrency itself, but rather the impact it inevitably bears as a "high-risk speculative asset" in a global high interest rate environment. When the tide (liquidity) goes out, it becomes clear who is swimming naked (high leverage).
Investor Insights:
· Pay close attention to the macro: The cryptocurrency market has become highly correlated with U.S. stocks (especially tech stocks), and the Federal Reserve's monetary policy will be the most important indicator in the near future.
· Beware of high leverage: Using high leverage in a highly volatile market is akin to picking up chestnuts from a fire.
· Understand market structure: Knowing how derivatives like ETFs, futures, and options affect spot prices can help better anticipate market dynamics.