After Bitcoin hit an all-time high of $124,474 on August 14, the market suddenly plummeted, with a maximum drop of over 15% within 24 hours, and mainstream cryptocurrencies collectively retracing by 20-30%. Behind this extreme volatility is the resonance of multiple factors:
I. Macroeconomics: Federal Reserve Rate Hike Expectations Resurface
Despite July's CPI data being below expectations, the 10% import tariff imposed by the Trump administration has increased supply chain costs, raising concerns about a rebound in inflation in the second quarter. The probability of a rate hike by the Federal Reserve in September rose from 30% to 55%, with the yield on 10-year U.S. Treasuries breaking above 4.2%, leading to a contraction in liquidity for risk assets. The rolling correlation between Bitcoin and NASDAQ over six months has risen to 0.5, with a 4% drop in tech stocks directly dragging down the crypto market.
II. Policy Game: The Sword of Damocles of Regulation Hangs High
India announced on August 12 that it is expanding the definition of crypto assets (VDA) to include all blockchain-based assets under a 30% capital gains tax, imposing a 70% penalty on undisclosed transactions. Meanwhile, the U.S. SEC is tightening scrutiny on exchanges, leading to an 8% drop in Coinbase's stock price due to rising compliance costs. However, positive signals are emerging: a new executive order from the U.S. government prohibits banks from discriminating against crypto businesses, and Custodia Bank founder Caitlin Long pointed out that this will lower operational barriers in the industry.
III. Technical Aspect: Key Support Level Lost Triggers Chain Reaction
After Bitcoin broke through the resistance level of $122,000 on August 11, it failed to hold the key support level of $116,500. The 4-hour K-line shows that the MACD histogram is extending negatively, and a KDJ death cross has formed, triggering automatic sell-offs from quantitative trading systems. Glassnode data shows that the cost basis for short-term holders (STH) is around $116,900; if this position cannot be recovered, it may drop to $110,000.
IV. On-chain Data: Bull-Bear Game Intensifies
Despite the price crash, on-chain data shows positive signals: whale addresses (holding over 10,000 BTC) have increased their holdings by 12% in the past 15 days, and exchange wallet balances have dropped to 2018 lows, indicating that institutions are accumulating coins against the trend. Miners' holdings have reduced to 2018 levels, significantly easing sell pressure. Although the SOPR indicator has decreased, it has not collapsed, indicating that investors are taking profits rather than panicking.
V. Market Dynamics: Japanese Companies Increasing Holdings Amidst Adversity
Tokyo-listed company Metaplanet Inc. holds 17,595 BTC and plans to increase it to 210,000 by 2027. Salon operator Convano has launched a green mining business, purchasing $13,500 worth of BTC daily. The Financial Services Agency (FSA) of Japan is redefining crypto assets as 'financial products', which may push for the approval of Bitcoin ETFs, with tax rules potentially dropping from 55% to 20%. This wave of 'Japan's Bitcoin Treasuryization' injects long-term confidence into the market.
Operational Strategy: Opportunities and Risks in the Pullback
Short-term: Watch for recovery at $116,900; if it stabilizes, it may rebound to $120,000; if it falls below $110,000, further downside should be monitored. Long-term: Glassnode indicates that the current pullback aligns with mid-cycle characteristics of a bull market; historical data shows that during the 2020-2022 uptrend, Bitcoin frequently experienced pullbacks of over 20%, followed by larger gains. It is recommended that investors use the pullback to gradually increase their positions, focusing on fundamentally strong DeFi blue chips (like LDO) and AI + blockchain sectors.
The extreme volatility of the crypto market is what makes it attractive. Under the interplay of Federal Reserve policies, regulatory games, and technical aspects, the current pullback is a process of self-purification for the market. Positive signals such as increased holdings by Japanese companies and loosening U.S. policies are building momentum for the next rise.
Do you think Bitcoin will bottom out at $110,000 or continue to decline? Leave your opinion in the comments section and follow me for real-time market analysis!
