Recently, Bitcoin has experienced significant volatility after breaking through its historical high, with daily fluctuations approaching double digits at one point. The clearing amount in the futures market surged, affecting both high-leverage long and short positions. The ETF fund flow reversal and macroeconomic liquidity expectation adjustments have become the core catalysts for this round of correction, compounded by intense selling pressure from on-chain profit-taking, leading to a rare failure of the "buy on dips" consensus trading, as the market begins to reassess the pace and upper space of this bull market.

Breakdown of Volatility Causes

● News: The sudden cooling of U.S. macro expectations was the direct trigger. Previously, the market had heavily bet on the Federal Reserve initiating multiple rate cuts within the year, fueling the "liquidity bull" narrative. However, recent data such as U.S. CPI and non-farm employment have repeatedly exceeded expectations, leading to a repricing of the federal funds rate path. The swap market now shows expectations for rate cuts this year reduced from 3 times to 1-2 times, delivering a blow to high-beta assets, causing BTC to quickly retreat from its highs.
● News: Regulatory and compliance uncertainties have been amplified again. The U.S. continues to tighten requirements for tax reporting, anti-money laundering, and exchange compliance for crypto assets. Research Brief mentions that the IRS and Treasury are continuously advancing new regulations regarding reporting and information exchange. Although the specific implementation timeline remains uncertain, the expectation of "rising compliance costs and shrinking gray areas" has weakened some long-term funds' tolerance for extremely high valuations.
● Funding: The fund flow of Bitcoin spot ETFs has shifted from net inflow to net outflow, becoming a key signal for the price reversal. Brief shows that after several weeks of daily net inflows reaching billions of dollars, there have recently been multiple days of net outflows exceeding hundreds of millions. Notably, the redemption data for leading products has significantly cooled, and the marginal influx of funds has slowed, leading to a lack of momentum for price increases.
● Funding: Excessive accumulation of derivatives leverage has amplified the downward slope. The funding rates for futures and perpetual contracts have long remained in a high range, and open interest (OI) continued to rise after the price hit new highs, creating a typical leverage accumulation structure of "price hitting new highs - OI hitting new highs." Once the price reverses, a chain reaction of liquidations is triggered. Brief data shows that the total network liquidation amount once reached tens of billions in a single day, amplifying this round of "flash crash" declines.
● Funding: Concentrated profit-taking on-chain. As BTC reached historical highs, on-chain data shows that over 70%-80% of holding addresses are in profit, with some long-term holders (LTH) starting to move their chips at high levels. The on-chain profit realization indicators have significantly increased, indicating that old funds are choosing to "cash out" at high levels, creating real selling pressure on the price.
● Sentiment: FOMO sentiment quickly turned into FUD. Previously, the popularity of BTC on social platforms and search trends surged, exhibiting typical characteristics of "everyone is bullish, consensus is only about getting in." However, after the price underwent significant corrections, the narrative quickly shifted to defensive topics such as "has the bull market peaked?" and "has ETF inflow ended?", causing the fear index to rise, and short-term traders frequently reduced their positions, with FUD sentiment being greatly amplified.
● Sentiment: The psychological expectation of "$100,000" was shattered. Many market participants viewed $100,000 as the "inevitable target price" for this bull market, even as a central price level. The potential for hundreds of thousands or millions of dollars in mid- to long-term expectations heightened emotional leverage. When the price reversed before hitting key round numbers, it led to consensus expectations being dashed, creating a significant emotional gap and greatly amplifying the intensity of selling and waiting.

Macroeconomic and On-Chain Deep Logic

This round of volatility is not an isolated event but resonates with macroeconomic liquidity cycles, structural fund behaviors of ETFs, and changes in on-chain holding structures. As the world remains in a high-interest-rate environment and U.S. inflation proves more resilient than expected, the pricing of risk assets must find a new balance between "high discount rates" and "growth expectations." Given that BTC's previous gains have significantly outpaced traditional assets, it is more susceptible to bubble-popping during expectation corrections. On one hand, the launch of spot ETFs undoubtedly enhances BTC's asset status and institutional accessibility in the medium term, but in the short term, it brings the trading attributes of "redemption-type funds": when prices surge and macro uncertainties increase, the inflows and outflows of such funds can undergo drastic reversals within days, making them more prone to sudden stops compared to traditional "intra-crypto circulation" funds. On the other hand, on-chain data exhibits typical characteristics of the "mid-to-late bull market": long-term holders gradually distribute at high levels, new funds concentrate on the top areas, and the distribution of holding costs rises to higher levels. When macro expectations weaken and ETF net outflows occur, the short-term chips concentrated at high levels become more fragile and are more likely to collectively flee under liquidation pressure and sentiment reversals, thus forming a feedback loop among price, leverage, and sentiment. In other words, this round of sharp decline reflects a new volatility mechanism following structural fund entry—BTC has shifted from being "purely narrative-driven" to a "macro-fund-sentiment coupling" model closer to traditional risk assets.

Divergence in Long and Short Positions

● Optimists: Believe this correction is a healthy trend adjustment.
● Historically, every mid-cycle BTC bull market has been accompanied by 30%-40% level deep corrections. The current adjustment magnitude is within historically comparable ranges and does not constitute a structural peak signal.
● The approval and launch of spot ETFs are seen as the beginning of the "institutional era." Brief points out that cumulative net inflows into ETFs remain in positive territory, and long-term holding funds (such as wealth management and pension channels) have just begun to establish allocation frameworks. The entry of these funds is measured in "years," not "weeks" or even "days."
● Although selling pressure from long-term holders has increased, the overall LTH holding quantity remains at historically high levels, indicating that true "long-term faith holders" have not yet exhibited panic selling, with more being structural profit-taking.
● For optimists, this round of correction is a "high-leverage cleansing," clearing out short-term speculative positions and high-leverage bubbles, creating space for subsequent longer-term upward movements.
● Pessimists: Worry that this round represents a deeper trend reversal.
● On a macro level, if U.S. inflation remains stubborn and interest rates stay high for longer, the valuation center of risk assets will systematically decline. BTC, as a "high-volatility technology-currency hybrid asset," may face prolonged valuation compression.
● Marginal changes in ETF fund flows are seen as important warnings: if large net outflows occur for several consecutive days, it indicates that the previous "crowded long ETF trade" is beginning to reverse, and institutional funds may shift from passive allocation to active reduction.
● If concentrated profit-taking on-chain continues, it will raise "turnover costs," requiring more funds and time for a new round of upward movements to complete chip redistribution; if the macro environment is unhelpful, it could very well evolve into a "rounded top" peak.
● Pessimists also emphasize that the market consensus around "the inevitable arrival of $100,000" itself is a typical bubble signal. This round of sharp decline may be a systematic correction of the previously overly optimistic narrative rather than a simple technical adjustment.

Key Observations for the Future

In the short term, the market needs to focus on the changes in three key variables: ETF fund flows, macro interest rate expectations, and on-chain chip structures, as well as their resonant directions. If, in the coming weeks, U.S. inflation and employment data show substantial declines, and interest rate futures are repriced for more rate cuts, while BTC spot ETFs stabilize with net inflows, it may provide support for the price to establish a new oscillation center at mid-to-high levels. Conversely, if macro data continues to be strong, rate cut expectations are further delayed, and ETF net outflows persist, this round of correction is likely to evolve into a longer-term range consolidation or even a trend reversal. In terms of rhythm, one should be wary of the re-accumulation of derivatives leverage, paying attention to whether funding rates and open interest regain control during rebounds; in terms of structure, one can observe the changes in long-term holders' positions and the rhythm of chips flowing back from short-term speculative positions to "strong hands" through on-chain data. Regardless of short-term trends, this round of volatility has clearly demonstrated: after deep involvement of ETFs and macro funds, BTC's pricing logic is shifting from "single narrative" to "multi-factor game," understanding this is more crucial than simply predicting whether a certain price point will be breached.

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