Recently, global risk assets experienced a rare indiscriminate sell-off, with Bitcoin suffering particularly severe losses. This decline is the result of multiple factors converging.
📉 Analysis of the core reasons for the sharp decline
1. Sudden changes in macro expectations: Federal Reserve 'hawkish' concerns
· Key event: Market rumors suggest that former hawkish figure Kevin Waller may replace Powell as the chairman of the Federal Reserve.
· Market impact: Waller is known for criticizing quantitative easing (QE). The market is worried that even if interest rates are cut in the future, the Federal Reserve may also simultaneously reduce its balance sheet (i.e., 'quantitative tightening'). This expectation has triggered panic over tightening global liquidity, leading to the sell-off of high-risk assets.
2. Capital flow reversal: Institutional 'blood transfusion' interruption.
· ETF fund outflow: As an important support for this bull market, the U.S. spot Bitcoin ETF's fund flow will reverse from net inflow to significant net outflow by the end of 2025 to early 2026. This indicates that institutional buying power is retreating.
· Retail investors are exiting: Surveys show that American consumers' adoption rate of cryptocurrencies is declining, and the exit of retail investors has exacerbated insufficient market buying power and liquidity tightening.
3. Market structure is weak: High leverage 'adds fuel to the fire.'
· Chain liquidation: Before the decline, the market accumulated high-leverage long positions. When Bitcoin continuously breaks through key support levels (e.g., 74,000, 70,000), it triggered large-scale forced liquidations, forming a 'long squeeze.'
· Data evidence: From February 5 to 6, over 570,000 people in the global crypto market were liquidated, with a total liquidation amount exceeding $2 billion.
4. 'Narrative' logic collapse: Hedging attributes are questioned.
· 'Digital gold' failure: In times of geopolitical tension (e.g., U.S.-Iran relations) and global market turmoil, Bitcoin has not demonstrated hedging attributes but instead dropped synchronously with risk assets like U.S. stocks, challenging its 'digital gold' narrative.
💡 'Wall Street involvement.'
Wall Street's deep involvement (through ETFs, etc.) has indeed changed the structure of the cryptocurrency market, making it more interconnected with traditional finance. However, this 'double-edged sword' also means:
· Volatility transmission is faster: Liquidity panic and changes in risk appetite in traditional markets will more rapidly transmit to the crypto market.
· Unstable funds: Institutional funds based on macro and risk control undergo 'tactical adjustments,' leading to more severe fluctuations in capital inflows and outflows, rather than stable support.
📝 Retail investors' recent (1-3 months) operational thought reference.
Current market sentiment is extremely fearful and is in the process of seeking a new balance. The core of recent operations should be 'defense' and 'discipline.'
1. Primary principle: Absolute risk control.
· Eliminate leverage: In an environment where leverage risk has not been fully cleared and market volatility is extremely high, using leverage is very prone to liquidation.
· Only use spare money: Ensure that investment funds do not affect basic living, and be psychologically prepared for asset zeroing.
· Reduce positions: If positions are too heavy, take any rebound opportunity to reduce positions and retain sufficient cash.
2. Key price levels and operational rhythm.
Recent trends depend on whether support can be gained at the aforementioned core price levels and attract capital backflow. Below are the key price levels and corresponding thoughts for you to grasp quickly:
Bitcoin (BTC)
· Recent strong support level: $60,000.
· Key psychological level: $68,000-$72,000.
· Recent resistance level: $65,000-$68,000.
· Recent operation thoughts: If it drops near $60,000, consider testing with a very light position, but set a stop-loss (e.g., $58,000). If it rebounds to the $65,000-$68,000 range and fails to break through, it is an opportunity to reduce positions.
Ethereum (ETH)
· Recent strong support level: Awaiting market confirmation.
· Key psychological level: Must be judged in combination with BTC trends.
· Recent resistance level: Must be judged in combination with BTC trends.
· Recent operation thoughts: The trend usually follows BTC but may be more volatile. It is not recommended to operate independently; if allocated, it should focus more on BTC.
Overall market.
· Core observation indicators:
1. U.S. spot Bitcoin ETF fund flow: Whether it can restore continuous net inflow is key to market confidence.
2. Federal Reserve policy signals: Any latest remarks about interest rates and balance sheet reduction will affect the overall situation.
3. Network-wide liquidation data: If liquidation volume significantly shrinks, it may indicate that leverage risk is clearing out in the short term.
· Recent operation thoughts: Focus on observing; do not make aggressive moves until the above indicators show a clear improvement. If attempting to catch a bottom, be sure to do so in batches and small amounts, and extend the time intervals.
3. Regarding other assets and long-term perspective.
· Stay away from altcoins: During market liquidity tightness, small-cap tokens carry extremely high risks and may face zero-risk scenarios.
· Understanding the market's new normal: Many top institutions believe that the market is transitioning from the 'halving cycle' narrative to a new paradigm led by institutions. This means volatility may become normalized, and the phase of purely speculative concept trading may have passed; future value will depend more on real demand and application.
💎 Summary
This recent crash is the result of a combination of macro shift, capital withdrawal, leverage liquidation, and narrative collapse. Wall Street's involvement amplified the volatility but is not the fundamental reason.
For retail investors, survival is more important than profit in the short term. Adhering strictly to risk control discipline and patiently waiting for signs of market panic release, leverage liquidation, and substantial improvement in capital conditions is the most important strategy right now.$BTC
