This article is reprinted with permission from Phyrex_Ni, and the copyright belongs to the original author.
The biggest event this week was the significant drop in prices in the early hours of October 11. There have been many reviews regarding the drop, so I won't go into detail in the weekly report. In short, Trump's announcement of a 100% tariff increase on China triggered panic in the cryptocurrency market. Since it was after the U.S. stock market closed on Friday, the impact on the stock market was limited, but the cryptocurrency market had to bear the brunt of the attack. The decline in BTC and ETH prices led to some investors using USDe for circular loans facing liquidation. The decoupling of USDe was due not only to the circular loan issues but also to problems with the Binance system and market makers, ultimately resulting in the liquidation of shell assets, marking the largest single-day drop in the past four years.
However, on Sunday, after Vance and Trump hinted that the tariffs on China were merely a form of intimidation, the market began to recover. Additionally, on Sunday, the Chinese Ministry of Commerce and the Ministry of Transport did not respond aggressively to Trump's additional tariffs, unlike the mutual escalation that occurred in early April 2025. By Tuesday, Bessent directly stated in an interview that the intention was not to genuinely impose tariffs on China but to exert pressure in negotiations. The market's rebound began to accelerate, with the S&P rising over 1.5% and the Nasdaq over 2% after the U.S. stock market opened on Tuesday evening, leading to expectations that this was another TACO from Trump.
Thus, for the cryptocurrency sector, this should be considered a black swan event, brought about by a combination of macro politics and exchange systems. Without Trump's macro threats, there would not have been a drop in BTC and ETH. Without Binance's issues with USDe circular loans, there would not have been a decoupling of USDe, leading to the liquidation of shell assets. Each link appears to carry minimal risk individually, but together they resulted in this significant drop, so this event cannot be viewed as a systemic risk.
Many people are asking if the bull market has ended. I have always opposed this view because, in my system, this cannot be considered a conventional bull market; it is at best an atypical bull market. This is because only a limited number of assets in the cryptocurrency sector can truly rise, and not all stocks in the U.S. market are increasing. Aside from AI and tech stocks receiving significant attention and support, many companies in the Fortune 500 have unsatisfactory growth.
Let alone the altcoins in the cryptocurrency or U.S. stock markets. According to the conventional bull market theory of widespread increases, it is indeed not a typical bull market now. The assets that can rise the most are limited to a few like $BTC, $ETH, $BNB, and $SOL, which aligns closely with the seven sisters of the U.S. stock market. The key focus should be on whether BTC has the potential to continue rising, rather than simply whether the bull market has ended.
This drop is essentially a cleansing of leverage for the market. On one hand, this volatility allowed several exchanges, including Binance, to promptly identify and fix potential systemic issues, reducing the likelihood of greater risks in the future. On the other hand, it also helped the entire market complete a new round of deleveraging.
Data clearly shows that the open contracts for $BTC have significantly decreased in a short time. Although it has not yet reached the lowest level in nearly a year, it is not far off. The deleveraging of $ETH is also evident, with the number of open contracts dropping by about 30% from its peak. This means that a large number of speculative positions in the market have been passively or actively cleared. Although prices are under short-term pressure, this type of drop is more of a technical liquidation rather than a deterioration in fundamentals.
Structurally, the prices of BTC and ETH remain in a high-level oscillation range. The withdrawal of leveraged funds has significantly reduced the sources of volatility and lowered the probability of large fluctuations. Once the market completes this deleveraging process, new leverage space will gradually be reopened. Historically, this stage often corresponds to a relatively stable price range, or even a slow upward trend. In simpler terms, this deleveraging has made the market healthier and has stabilized the spot support for BTC and ETH, potentially allowing for greater upward movement.
In terms of politics, while short-term optimism may still be limited, on Tuesday morning, China's countermeasures began to escalate again. Although this time it was not as direct as in April regarding tariffs, the scope of rare earth controls has increased. Moreover, the language used by the Ministry of Commerce has shifted from "lawful management" to "safeguarding national security and opposing the U.S. abuse of sanctions," indicating that rare earths have transitioned from an industrial policy to a diplomatic countermeasure tool. Furthermore, not only in the rare earth sector, but this afternoon, the Ministry of Commerce also released the latest sanctions targeting Hanwha Ocean Co., Ltd. Although this company is a South Korean enterprise, the announcement emphasized its related subsidiaries in the U.S., meaning that while the countermeasure targets a South Korean company, it is fundamentally aimed at the U.S.
The announcement used phrases like "assisting and supporting U.S. government-related investigations, harming our sovereignty, security, and development interests," indicating that this countermeasure is not merely an economic sanction but views Hanwha as an agent "interfering in the U.S. sanctions system and assisting hostile actions." This effectively includes third-country enterprises that "cooperate with U.S. sanctions" within the scope of China's countermeasures. This is the first time the Anti-Foreign Sanctions Law has been extended to the maritime chain and overseas branch level. From this moment on, China's countermeasure framework has moved beyond technical export restrictions or equivalent tariffs, entering the stage of ecological sanctions. From China's countermeasures, while there has been a show of strength, it does not contain overly exaggerated elements.
As one side finishes, the other takes the stage. Following China's countermeasure information, Trump also issued his own countermeasure just before the U.S. stock market closed on Tuesday, considering terminating trade in edible oils and other trade items related to China as retaliation. He cited that the U.S. can produce edible oils itself and does not need to import them from China. In fact, if it weren't for the final example, the threat to the market might have been greater, mainly because the U.S. itself imports very little edible oil. Even if it completely stopped imports from China, it would not constitute a loss in U.S.-China trade.
Of course, this could also be an excuse for Trump to give himself a TACO, as he had previously expressed that he felt the relationship with China would be fine. But since it is Trump's statement, it is now China's turn to respond. I think if Trump genuinely wants a TACO, the countermeasure he offers, which is not painful or even lacks a time limit, is a pure idea that suggests China should not escalate further. If China does not continue, I believe the U.S.-China tariff issue may temporarily come to an end, allowing for continued negotiations, and there is a high probability that the newly added 100% tariffs will be postponed.
Returning to the question of whether we are still in a bull market, as mentioned earlier, this drop is not systemic but rather triggered by a short-term event. The real systemic risks still lie within the U.S. monetary policy and economic structure.
Although there are still potential risks in the trade issues between China and the U.S., various signals indicate that neither side wants to escalate tensions. Even during the 150% tariffs in April, a peaceful resolution was achieved. This time, even if it is not a TACO, there should be opportunities for de-escalation. The key issue is whether the Federal Reserve will choose to cut interest rates early under the dual pressures of politics and the economy. However, the government shutdown complicates everything. Due to the closure of some government departments, the retail sales and PPI data originally scheduled for release this week cannot be published on time, meaning the market will temporarily lose key inflation and consumption reference indicators.
According to Kalshi's predictive data, the market bets that this round of shutdown may last more than 35 days. If this happens, it will exceed the record set during Trump's first term, becoming the longest government shutdown in U.S. history. Its impact will extend far beyond the administrative level.
First, there will be temporary unemployment. Trump is even considering permanently laying off some government employees, which will undoubtedly drag down the U.S. labor market. A decrease in the employed population, a decline in the labor participation rate, and an increase in the potential unemployment rate will all become signals that the Federal Reserve must pay attention to. These changes are also reinforcing market expectations for the Federal Reserve to continue cutting interest rates. Although this is an artificial wave of unemployment, its impact on labor data is real. Meanwhile, tens of thousands of federal employees will experience short-term income interruptions, leading to decreased consumer spending and increased credit card delinquency rates, making the impact on low-income groups particularly evident. These are all factors the Federal Reserve must consider.
From an economic perspective, the impact of the shutdown is also very direct. According to estimates from the Congressional Budget Office, for every week of shutdown, the U.S. GDP will decrease by about $15 billion, approximately 0.05% of quarterly GDP. Although some activities will be made up after the shutdown ends, productive losses, delays in government procurement, and contract defaults cannot be fully recovered. The suspension of government contracts and delayed payments to small suppliers will also lead businesses to postpone hiring and investment plans. Overall, if the shutdown lasts more than three weeks, quarterly GDP growth typically declines by 0.3 to 0.4 percentage points, with an impact level comparable to a mild fiscal tightening.
From a macro perspective, this fiscal contraction will undoubtedly weaken short-term growth momentum but may also push the market to re-bet on the return of liquidity easing. Moreover, the stagnation of fiscal spending will temporarily reduce the consumption rate of the Treasury General Account (TGA), thereby releasing liquidity in the short term, which has a buffering effect on risk markets, although this effect is temporary.
The chain reaction brought about by this shutdown is forcing the Federal Reserve to consider longer-term policy arrangements and has become a strategy for Trump to pressure the Federal Reserve to cut interest rates. From the current data, the CME's probability forecast for the Federal Reserve to cut rates in October has reached as high as 97.3%.
On Tuesday, Federal Reserve official Paulson, although not a voter in 2025, publicly expressed support for the Federal Reserve to cut rates once in the next two meetings. On Tuesday evening, Collins, also a voter in 2025, indicated that risks in the job market suggest the need for more easing policies and stated that a further cut of 25 basis points would be appropriate. Such statements further solidify market expectations for the Federal Reserve to cut rates in October.
If the Federal Reserve cuts rates in October, the next meeting window will be at the end of December, giving the market ample time. Structurally, the probability of systemic risks emerging in 2025 is not high, and there is even a possibility of another rate cut by the end of the year. For risk markets, this is the most ideal expectation. More importantly, by 2026, even if the Federal Reserve maintains a tightening stance, Powell's term as chairman will expire in May, and at that time, Trump will undoubtedly further strengthen his political influence over the White House and the Federal Reserve. The market often welcomes such predictable interventions.
And it doesn't stop there. In Powell's speech early Wednesday morning, although he still did not provide a clear monetary policy path, he indicated that the Federal Reserve might end balance sheet reduction in a few months, and ending balance sheet reduction often signifies that the Federal Reserve is about to enter a true monetary easing state. Therefore, for 2026, there is an additional market-friendly expectation.
Thus, from a comprehensive perspective, I do not believe that the "bull market" has come to an end. Even if this is an atypical bull market, it still maintains inertia within macro liquidity and policy expectations. However, risks do exist; an economic recession hangs over the market like the sword of Damocles, potentially falling at any moment. This is currently one of the most uncertain systemic risks.
In addition to the economic contradictions between China and the U.S., the shadow of geopolitical conflicts has not dissipated. On October 12, 2025, during a visit to Israel, Trump stated that if Russia does not end the war, he might provide Ukraine with long-range Tomahawk missiles through NATO channels, claiming that such weapons would enable Ukraine to strike targets deep within Russia, including Moscow. However, he emphasized that this would not be a direct transaction between the U.S. and Ukraine, but rather a transfer through NATO. He also mentioned that before making a final decision, he would first understand Ukraine's specific plans for use to avoid escalating the conflict. Although this proposal is still under discussion, it indicates a risk of further escalation in the geopolitical situation.
If the conflict truly expands, its impact may be more profound than an economic recession. Once it evolves into a systemic risk involving politics and military actions, it will simultaneously shake energy, exchange rates, risk assets, and the global trust structure. Such risks would be even more frightening.
The crisis is not limited to the macro market; some risks can also be seen in the data. For instance, I often mention data that has never been wrong historically, which had previously provided very friendly signals. Before this significant drop, it indicated a distribution state among long-term holders (exchanges), corresponding to the potential for Bitcoin prices to continue rising. However, this time, there has been a sudden appearance of long-term holders accumulating, and significantly so. If this accumulation trend continues, there is indeed a possibility of a price drop for BTC.
However, if we look at it from another angle, from February to April this year, it was also a period of accumulation by long-term holders, and the most severe drop was also due to tariff issues with China. After the easing of the U.S.-China tariff situation, long-term holders shifted from accumulation to distribution. If we follow this logic, does it mean that we entered a bear market in February, and then re-entered a bull market at the end of April? Or will this time's accumulation by long-term holders also revert to a distribution state after some time, similar to the first half of the year?
From my personal perspective, we have defined bull and bear markets. The current situation is at most a bull market for BTC and a few assets, while for most cryptocurrency assets, it remains in a bear market. Therefore, what we need to study is not whether the "bull market" has ended, but the reasons behind this atypical bull market and what circumstances might end it.
Undoubtedly, the catalyst for this bull market starting in 2024 has been the spot ETFs for Bitcoin and ETH. More importantly, it may be Trump's presidency leading to a more lenient stance on cryptocurrencies and support for AI and technology, which has driven demand for rising U.S. stocks. So, if Trump continues to hold office, maintains a lenient policy on cryptocurrencies, and continues to support the AI and technology industries, I believe this atypical bull market will likely continue. As of now, I still do not see the possibility of BTC being unrelated to the U.S. stock market. Therefore, if one believes that U.S. stocks will continue to rise, then BTC will at least not perform poorly.
Ending the upward trend, including that of U.S. stocks, will likely require the emergence of systemic risks in the U.S., such as an economic recession, entering a war, or a significant resurgence in inflation prompting the Federal Reserve to return to a tightening path, all of which could create systemic risks.
If systemic risks do not emerge in the future, the market has little reason to worsen. Especially in the second half of 2026, the market is likely to anticipate a more significant rate cut and a halt to balance sheet reduction. Although such actions may prolong inflation and make it more stubborn, for Trump, this is not an immediate issue to resolve. After all, in his political timeline, the key is to maintain a strong economy and a prosperous market by mid-2026, while the costs of inflation can be addressed in 2027.
Let’s also look at other on-chain data for support.
First, the BTC inventory data from exchanges shows that the stock of BTC on exchanges has been continuously declining over the past week. This indicates that when BTC prices fell, more investors did not transfer BTC to exchanges to attempt to sell off, but rather more investors were buying on the dips, and even now, there is no intention to stop buying. Switching to annual data makes this even more apparent; the current BTC inventory is at its lowest point in the past year. If we extend the timeline, this is the lowest point since June 17, 2019, indicating that investor sentiment remains relatively strong.
Of course, this is from the spot perspective. From the ETF perspective, the situation may be somewhat disappointing, as the buying volume for spot ETFs just reached a peak expectation before being pushed back down. Especially during the recent price drop, the data for spot ETFs generally performed poorly, but compared to the selling pressure from earlier, it is not significant. More investors have returned to a state of not buying, which should represent that most traditional investors are in a wait-and-see mode rather than panicking and exiting. Similarly, from IBIT's data, although the buying volume in the primary market is not very good, the purchasing sentiment in the secondary market remains decent, especially during the downturn, where the trading volume from bottom-fishing has significantly increased, indicating that overall investor sentiment is at least not bearish.
The same situation applies to ETH. Although there has been a large amount of selling in the primary market for ETH spot ETFs, the performance in the secondary market is still acceptable, with substantial trading volume. However, compared to BTC in terms of capital volume, ETH's data still lags significantly behind BTC. The same result as last week shows that while traditional investors' buying sentiment for cryptocurrencies has hit a low, interest in BTC is clearly greater than that in ETH. This also indicates that BTC's stability and growth potential are still leading at least for now.
Additionally, regarding the distribution of BTC holders, high-net-worth investors holding more than 10 BTC have shown a slight downward trend in the face of price declines. Considering that the inventory on exchanges is also declining simultaneously, this can be interpreted as a reduction in holdings on exchanges, as it is not substantial. In contrast, small-scale investors holding less than 10 BTC have shown clear signs of bottom-fishing. Currently, high-net-worth investors collectively hold 16.493 million BTC, an increase of 1,000 BTC compared to the same period last week. BTC continues to move towards high-net-worth investors, indicating that even after significant price drops, these investors have not exited in large numbers.
Finally, looking at the URPD data, the current situation appears quite good. After the price drop, there has not been a significant breakdown in holding volume, and the support levels remain very resilient. Even during the worst sentiment and chain liquidations, BTC's price did not fall below $100,000 and quickly rebounded above the support level, indicating that the sixth support level has withstood the test of large-scale liquidations. Therefore, if systemic risks do not emerge, there should not be significant issues.
In summary, this drop can be considered a non-systemic black swan. Although it was triggered by Trump's tariffs, it has indeed revealed some inherent issues within the cryptocurrency sector. While prices have seen significant adjustments, stability remains relatively good, especially for BTC. The current main contention still revolves around U.S. monetary policy, with the Federal Reserve's interest rate control being the market's primary focus. However, the trade friction between China and the U.S. and the geopolitical conflicts involving the U.S. are factors we need to be cautious about. Personally, while I cannot say that the market outlook is a complete bull market, I still believe that there may be opportunities for BTC to continue rising.
Related: The Bitcoin (BTC) fear index hits a new low for the year, but Bitwise states: Now is the time to accumulate, not panic.
Original: “The Black Swan in a Non-Typical Bull Market: From Tariff Shock to Crypto Deleveraging Recovery”
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
