Bitcoin & Ethereum Plunge: US Market Pressures Unveiling Underlying Causes

Bitcoin & Ethereum Plunge: A Closer Look at the Underlying Causes

Bitcoin failed to hold the critical $100,000 psychological support level, briefly dipping below $97,000, marking its lowest point since May. Ethereum also plummeted 8% to $3167, its lowest since July. This cryptocurrency crash isn't an isolated event, but rather the result of several structural pressures simultaneously unfolding in the US market.

US Market Selling Pressure Dominance: Coinbase Premium Index Registers Deep Negative Values

According to XWIN Research chain data, US retail investors are the main driving force behind the current decline. The Coinbase premium index has remained deeply negative for several consecutive weeks, with Bitcoin trading on Coinbase at a lower price than other global exchanges. This indicates that selling pressure in the US market far outweighs buying demand in Asia or Europe, which is consistent with a recurring pattern: Bitcoin rises during Asian trading hours in the daytime, but sharply reverses during US trading hours in the evening.

Widespread Profit Taking by Long-Term Bitcoin Holders

Research by analysts, including Will Clemente, co-founder of Reflexivity Research, indicates that selling pressure is not concentrated in a specific group, but is widely distributed among holders of 6 months, 18 months, 3 years, and even 7 years. This phenomenon is extremely rare. Fidelity has also confirmed that many long-term American digital asset holders are taking profits before the end of the year to complete investment allocation adjustments for this year.

Government Shutdown: Data Deficiencies and Potential Impact on Federal Reserve Decisions

From a macro policy perspective, despite the end of the nearly two-month government shutdown, the market fears that the loss of critical data due to the shutdown may strengthen the US government's reasons for keeping interest rates unchanged. White House Press Secretary Karoline Leavitt revealed on Wednesday that some October economic reports may not be released. National Economic Council representative Kevin Hassett also confirmed to Fox News that the government will not release the October unemployment data because "there was no household survey conducted in October, so we will only get half of the employment report."

According to CME Group's FedWatch, traders currently price in a 51% probability of a Federal Reserve rate cut in December, down from 69% a week ago. In addition, during the US government shutdown, market liquidity was severely impacted. As the federal government stopped spending, a rare fiscal surplus emerged, which equated to billions of dollars being withdrawn from the market. Under the dual pressures of tight market liquidity and profit-taking by long-term digital asset holders, traders' expectations for a Federal Reserve rate cut in December have fallen sharply. According to CME Group's FedWatch, the probability of a rate cut is currently priced at 51%, down from 69% a week ago. This decline is primarily attributed to market concerns about the Federal Reserve's next move, tight market liquidity, and profit-taking by long-term digital asset holders.

Stock Market Declines and AI Profitability Anxieties

Additionally, the tech-heavy Nasdaq index fell sharply by 2.3% on Thursday, and crypto-related stocks fell by 10-20%. Palantir CEO Alex Karp expressed concerns about the profitability of AI in an interview with Yahoo Finance's Invest, saying that not every AI application can "create enough value to justify the actual cost." This further increased market investors' concerns that the US economy may be entering a weak phase. Palantir (PLTR), Intel (INTC), and CoreWave (CRWV) stock prices all fell by 6% or more in a single day.

Cointelegraph Analysis: Overall Outlook Remains Positive

Cointelegraph pointed out that this selling pressure does not represent large Bitcoin holders liquidating their holdings to realize profits. Crypto analyst PlanB also believes that the current long-term selling pressure primarily comes from holders who entered the market between 2017 and 2022. Market data indicates that traders are not particularly bearish on Bitcoin itself, and there is no specific major event that has triggered panic. This decline is more reflective of the uncertainty in the overall economic environment.