Market Overview

Recently, the market has shown significant divergence during the early trading hours in the U.S.: Bitcoin's price broke below the $87,000 mark without any major negative news, dipping to around $86,500 at one point, marking a new low in this round of correction. In tandem with the weakening spot price, Bitcoin mining company stocks generally fell, with declines often exceeding 5%. The "mining rights" and "coin prices" in the on-chain and primary markets resonated with this downward trend. Amidst the volatility, the pressure on leverage was particularly pronounced, with data showing that approximately 220,000 people were passively liquidated in this round of decline, resulting in total losses close to $12.2 billion. High-leverage long positions faced concentrated liquidation within an hour, triggering a chain reaction of forced liquidations that amplified price fluctuations. Meanwhile, traditional safe-haven assets strengthened across the board: gold futures broke through $4,500 per ounce, reaching a historic high, with a year-to-date increase of over 70%. Silver, platinum, and copper prices also hit new highs or approached peak levels. The divergence between price and capital flow quickly split the sentiment in the crypto community, with some falling into panic and doubt, believing that risk appetite was retreating; while others viewed it as a signal of capital rotation, betting that Bitcoin would rebound after stabilizing in the $86,000 to $88,000 range. This emotional shift from panic to rotation expectations formed the emotional backdrop of this round of volatility.

News and Macroeconomics

From the news perspective, this round of Bitcoin's decline did not see any significant negative factors such as regulatory crackdowns, exchange incidents, or macro black swans. It appeared more like a technical correction following a series of highs and a concentrated cleansing of high-leverage long positions. Glassnode co-founder Negentropic pointed out that a nominal amount of about $23.6 billion in Bitcoin options was set to expire recently, and over the past few weeks, prices were suppressed by hedging and insurance structures, with upward movements appearing more as "mechanical lifts" rather than driven by natural buying. As this batch of options expired, the pressure from derivative positions and gamma hedging began to clear, and the price discovery mechanism is gradually returning from being dominated by derivatives to being led by spot and macro liquidity. Looking at a longer time frame, the U.S. M2 money supply grew by 4.3% year-on-year in November, reaching approximately $22.3 trillion, and has maintained an expansion state for 21 consecutive months, continuously diluting the actual purchasing power of fiat currency, providing macro support for the long-term bullish narrative of "digital scarce assets." In contrast, geopolitical tensions and rising safe-haven expectations have driven gold, silver, and other precious metals to new highs, attracting some medium- to long-term funds back to traditional safe-haven assets, resulting in a short-term misalignment of "new highs in precious metals, Bitcoin's correction."

Capital and Derivatives

The structure of capital and derivatives played an amplifying role in this round of volatility. Market data shows that Bitcoin plummeted from about $93,000 to $88,500 in a very short time, with a drop of about 4.3% in one hour. This rapid sell-off directly triggered about $15 billion in forced liquidations, becoming the catalyst for the liquidation of 220,000 accounts across the network, resulting in losses of approximately $12.2 billion. As high-leverage long positions were concentratedly liquidated, mining company stock prices also fell over 5%, indicating that not only derivative accounts were affected, but also the equity related to computing power and production capacity faced emotional shocks. Negentropic mentioned that this nominal amount of about $23.6 billion in Bitcoin options expiring is one of the largest option expirations in history. In the weeks leading up to the expiration, a large number of hedging positions suppressed the price upward movement through reverse operations in futures and spot markets, making each upward breakout attempt feel more like a forced "pull" by the derivative structure rather than a natural trend. As this flow of funds and hedging demand gradually dissipates, the price structure is breaking free from the dominance of hedging positions and returning to being determined by spot buying. Additionally, institutional funds have not fully retreated; QCP Capital recently transferred about 400 Bitcoins to Binance and had a total of about $7.12 million in bullish trades during the volatility, indicating that some professional institutions chose to increase their positions on dips rather than blindly reduce their holdings and exit.

Bitcoin and Precious Metals

When comparing Bitcoin to precious metals, the contrast in this round of market activity is particularly striking: gold futures recently broke through the historic high of $4,500 per ounce, with a cumulative increase of over 70% this year, while silver, platinum, and copper prices are also in a strong upward cycle. In contrast, Bitcoin recorded its weakest fourth-quarter performance in the past seven years without any significant negative news. A notable market debate centers on whether funds are withdrawing from high-volatility digital assets like Bitcoin to allocate to more traditional safe-haven assets such as gold and silver. Some viewpoints suggest that in a phase where geopolitical uncertainty and interest rate turning points are not fully clear, funds are more inclined to choose physical assets with long-term "value anchors"; while others argue that this is more of a cyclical misalignment rather than a structural migration. Several KOLs have also expressed differing opinions; for example, some analysts believe that with gold and silver leading the way to new historical highs, while Bitcoin is suppressed in the $86,000 to $88,000 range, historical phases like 2020 often see precious metals strengthen first, followed by Bitcoin's rebound when risk appetite recovers. Historical experience shows that during phases of renewed easing expectations and overall recovery of risk assets, Bitcoin often lags behind precious metals, initially attracting safe-haven funds to gold and silver, and only later, when the market confirms a marginally easing liquidity environment and clearer downward interest rate paths, does Bitcoin experience a steeper upward slope.

Long and Short Game

Around the current price level, the battle between bulls and bears is intensifying. Bears are primarily exploiting the structural weakness of a large number of high-leverage long positions in the market in the short term, concentrating selling pressure at key price levels to amplify volatility, triggering a chain reaction of forced liquidations that compel more passive selling. The recent 4.3% drop within an hour, which directly ignited about $15 billion in forced liquidations, is a concentrated demonstration of this "liquidation-style suppression" mechanism. In contrast, the bull camp continuously emphasizes that Bitcoin's fundamentals and macro environment are forming a rare favorable combination: the U.S. M2 has expanded for 21 consecutive months, with a year-on-year growth rate of 4.3%, and the long-term fiat dilution logic is believed to continue supporting the pricing of scarce assets; institutions show signs of accumulating positions on dips in both spot holdings and options structures; at the same time, institutions like Glassnode believe that with the expiration of $23.6 billion in options, the selling pressure from the derivatives side has significantly eased. Some institutions even view Bitcoin as one of the highest-returning assets over the next decade from a long-term framework, with conservative modeling suggesting potential for future prices to reach the million-dollar level. Bulls also cite historical cycles, such as the approximately 1,064-day bull-bear transition pattern, arguing that the current correction is more akin to a mid-term adjustment rather than a trend reversal, representing a "healthy consolidation" after the previous round of significant gains, creating space for the next major upward wave. Under this narrative hedge, prices are oscillating in the short term amidst intense tug-of-war between bulls and bears, with sentiment swinging back and forth between panic and faith.

Future Path

Looking ahead, the evolution of prices largely depends on the pace of deleveraging and the ability of spot buying to absorb the pressure. If the high leverage in the derivatives market continues to be orderly cleared, and the pressure from forced liquidations gradually diminishes, while spot buying represented by institutions and medium- to long-term funds can continue to absorb in the $86,000 to $88,000 range, then this area is expected to gradually evolve into a new trading center for the next round of market activity, laying the foundation for the next directional choice in prices. Conversely, if geopolitical risks escalate further, pushing gold and other precious metals to continue rising significantly at high levels, the attractiveness of traditional safe-haven assets will be further strengthened, and crypto assets may face short-term "passive reduction" pressure in allocation, especially for institutional investors with limited risk budgets. More broadly, Bitcoin's trajectory remains intertwined with the Federal Reserve's interest rate path and the global liquidity environment: if we enter a more defined rate-cutting cycle accompanied by liquidity expansion, risk assets overall will benefit, and Bitcoin is likely to amplify its "high beta + scarcity" pricing advantage in competition with tech stocks and gold; conversely, if high interest rates persist significantly longer than expected, risk appetite may continue to be suppressed. For investors, it is essential to clearly distinguish between short-term deleveraging and long-term macro and technical logic in their strategies, setting reasonable stop-loss and target ranges based on their positions and capital costs, while also assessing their tolerance for high volatility to avoid being passively liquidated or blindly increasing positions during the worst liquidity and most pessimistic emotional moments, employing a more systematic risk management approach to navigate this round of volatility.

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