Author: Blockchain Knight

After the U.S. market opened on January 29, the global market experienced a synchronized crash: Bitcoin fell below $85,000; S&P 500 futures dropped by 1.1%, the dollar index rose by 0.3%, crude oil surged by 3%, and gold and silver plummeted by 5.8% and 6%, respectively.

The movements of various assets were chaotic and conflicting, with the core logic not driven by a single event, but rather a "liquidity first" deleveraging game, where initial position adjustments far outweighed market narratives.

The key clues to market volatility were the weak oil prices and U.S. tech stocks. Brent crude oil broke through $71 per barrel, reflecting the pricing of tensions between the U.S. and Iran and risks in the Strait of Hormuz.

In the U.S. stock market, Microsoft's significant increase in data center spending caused investor unease, dragging tech stocks down, while the liquidity peak at the U.S. market open triggered the activation of systemic strategies, further amplifying the selling sentiment.

Although Bitcoin trades around the clock, it is bound by financing and margin systems, and as a global risk asset, it is viewed as an amplifier of panic sentiment, leading to simultaneous sell-offs.

The core of Bitcoin's rapid decline was driven by mechanical liquidation. After initial spot sell-offs and hedging, the derivatives market took over, triggering stop-loss orders and reducing open contracts, ultimately leading to large-scale liquidations.

According to Coinglass data, as of midnight, the liquidation amount in the crypto market exceeded $800 million within 24 hours, of which $691 million came from long positions, which also explains why the subsequent decline was much faster than the initial sell-off phase.

The decline in gold, seemingly counterintuitive, actually aligns with the patterns of different stages of panic:

First, when the market urgently needs to raise funds, liquid assets become "automatic teller machines," with gold being the first to suffer due to its high liquidity;

Second, a strong dollar suppresses the intraday movements of dollar-denominated commodities;

Third, gold had previously surged to a historical high of $5,602 per ounce, and with speculative positions piling up, the end of the upward trend inevitably accompanied a deleveraging pullback, currently having fallen to around $5,100, implying a market value evaporation of about $2 trillion, comparable to the total market value of all cryptocurrencies.

Overall, the core of this volatility is comprehensive deleveraging, with rising oil prices triggering inflation and geopolitical concerns, U.S. stock sell-offs triggering a chain reaction, and a strong dollar tightening liquidity, testing all crowded trading positions.

Going forward, attention should be paid to whether Bitcoin can stabilize and recover key price levels after liquidation, distinguishing between passive sell-offs and active exits; whether crude oil will continue to rise, as this would prolong pressure on risk assets.

Additionally, the movements of the dollar and concrete news regarding Middle Eastern geopolitics should be monitored; if the situation escalates, volatility may persist; if there are no substantial negative factors, the market may retreat from panic premiums and rebound.

Currently, the market is in a real-time deleveraging phase, with some assets attempting to recover, and the final trend may depend on the subsequent developments in the Middle East situation.

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