Following the decline but not the rise, why did Bitcoin plunge again? - ChainCatcher

The cryptocurrency market, after a period of consolidation, experienced a sharp decline from last night to this morning. Bitcoin fluctuated lower within a few hours, quickly breaking below the $85,000 mark, retreating from around $89,000 on the 28th to approximately $82,000 on the 30th, a total drop of about 7-8%, reaching the lowest point since November last year.

This sudden and severe pullback caught investors off guard, resulting from a combination of a collapse in tech stock sentiment, escalating geopolitical risks, and internal liquidity drying up within the crypto market.

Microsoft Earnings Report Sparks Investor Concerns Over AI Benefits

The recent decline in the crypto market is largely linked to the US stock market opening. According to foreign media reports, after the US stock market opened on Thursday, global markets immediately entered a downward trend. The core driver was the earnings report released by tech giant Microsoft after the US market closed the previous day.

Although the company’s Q4 revenue grew by 17%, concerns arose over overinvestment in AI due to slowing cloud segment growth and massive AI-related expenditures. Microsoft’s stock price plummeted 12% after the earnings release, dragging down the entire tech sector.

Following the US stock market opening on Thursday morning, the Nasdaq Composite fell about 2.3%, and the S&P 500 declined approximately 1.5%. The broad decline in tech stocks quickly spread to the cryptocurrency market. Bitcoin’s price rapidly dropped to a low of $81,000 within a short period. According to CoinGecko data, Bitcoin’s recent trading price has already fallen by 6% compared to a week ago.

Cryptocurrencies as the First Risk Assets to Be Sold Off

Unchained Market Research Director Timot Lamarre pointed out that although many consider Bitcoin to be the most resilient currency in the world, the vast majority of market participants still view Bitcoin as a tech stock trading asset. This perception makes Bitcoin vulnerable when traditional tech stocks suffer heavy losses. Historical data confirms this, showing a significant correlation between Bitcoin and the US stock market, especially tech stocks. When investor confidence in the tech sector wanes, cryptocurrencies often become among the first risk assets to be sold off.

Meanwhile, Ethereum dropped over 7% in a single day, with its trading price falling to around $2,729. Besides these two major coins, other top ten cryptocurrencies by market cap also experienced declines of 4% to 6%.

Among mainstream coins, popular tokens like XRP and Solana also experienced similar single-day declines. Overall, the total market capitalization of cryptocurrencies decreased by about 5%, now standing at $2.79 trillion.

Large-Scale Liquidation Events Create a Vicious Cycle

In addition, this sharp decline triggered large-scale leveraged liquidations. According to CoinGlass data, over the past 24 hours, more than 200,000 traders’ positions were forcibly liquidated, totaling over $813 million. The majority of these liquidations involved long positions, amounting to nearly $700 million, indicating that there was a large amount of bullish betting before the price collapse.

DLNews data shows that alone, $313 million worth of Bitcoin long positions were liquidated on that day, with an additional $327 million of Bitcoin-related positions wiped out in the past 24 hours. Ethereum followed closely, with liquidation amounts reaching $134 million.

Such large-scale liquidation events often create a vicious cycle.

When prices start to fall, forced liquidation of leveraged positions further increases selling pressure, pushing prices down further and triggering more liquidations. This avalanche effect is especially pronounced in markets with low liquidity, causing prices to fall much faster than market expectations.

Instability in the Middle East and Multiple Macro Risks Erupt

Beyond the tech stock drag, multiple macro risk factors are also exerting pressure on the market. Tensions between the US and Iran have escalated again. According to Reuters, today US Defense Secretary Pete Hegseth stated that regardless of President Trump’s decisions regarding Iran, the US military is prepared to carry out missions to prevent Tehran from developing nuclear capabilities. “They should not seek nuclear capability. Whatever the President’s expectations for the Defense Department, we will be ready to accomplish the mission.”

Some US officials also revealed that Trump is evaluating various options but has not yet decided whether to take military action against Iran. Trump has repeatedly warned that if Tehran resumes its nuclear program, the US will take action.

Meanwhile, the risk of a US government shutdown is also factored into market pricing. If negotiations remain deadlocked before key deadlines, several federal agencies could face operational disruptions, delayed payments, and reduced fiscal clarity in the near term. Historical data shows that during the last three government shutdowns, Bitcoin prices experienced significant declines, with a maximum drop of 16%.

Crypto Market Structure Is Fragile, Deepening Downside and Difficult to Rebound

Finally, the inherent fragility of the crypto market structure is arguably the most important reason for the deepening decline. This year, US spot Bitcoin ETFs have net sold about 4,600 BTC, compared to nearly 40,000 BTC net inflow in the same period last year. ETFs should have been the most stable buying source in this cycle, but with this support gone, the rebound has lost momentum, and the decline has become more intense due to lack of support.

At the same time, retail investors are also withdrawing. On-chain data shows that small transactions between $0 and $10,000 have sharply contracted over the past month, with not only slower buying but also a significant decrease in participation. When ETF buying support disappears and retail investors exit, the market is left with only short-term traders and leveraged speculators, inevitably increasing volatility.

Cryptocurrency Market Matures, but Market Structure Remains Fragile

Additionally, according to Beincrypto, most holders are still in profit. The Bitcoin loss supply indicator is relatively low by historical standards, indicating that many chips have not yet experienced real pain, which often suggests further downside rather than a bottom. “Only when prices continue to decline, and more holders turn to losses, will panic selling truly begin.”

However, Pantera Capital’s outlook for this year’s market suggests that, based on historical cycles, the current decline of non-Bitcoin tokens has lasted as long as the bear markets of 2018 and 2022 (about 12-14 months). Market sentiment has also been compressed to near capitulation levels, possibly indicating an approaching cyclical bottom.

Although the crypto market has become more mature, it still cannot withstand multiple negative factors stacking up. It can be said that US stock sell-offs, US-Iran tensions, and government shutdowns have acted as catalysts for this sharp decline, but liquidity drying up caused by ETF outflows and reduced retail demand points to an already fragile market structure.

If upcoming tech earnings reports fail to deliver strong confidence, or if geopolitical tensions worsen further, Bitcoin and the crypto market may need to face deeper adjustments before they can recover.

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