Bitcoin plummeted from a historical high of $124,000 to below $115,000, a drop of over 7%. This is not a simple technical correction but the result of multiple macro factors resonating. The U.S. Producer Price Index rose more than expected, reigniting inflation concerns, and the market's expectation for a 50 basis point rate cut by the Federal Reserve in September has sharply contracted to 25 basis points. The Alaska summit between Trump and Putin failed to reach a substantial agreement on the Ukraine issue, further exacerbating geopolitical uncertainty and increasing risk aversion.
From a technical perspective, Bitcoin is showing a typical double top pattern, which is a strong bearish signal. However, the trading volume has not significantly increased during the decline, indicating that major funds are not fleeing en masse, but rather it appears to be an organized consolidation behavior. The $110,000 level is a key support zone, which has often served as a rebound starting point and is an important price level for many institutions to build positions.
On-chain data reveals different signals. The number of large addresses has increased by about 50 in the past week, indicating that institutional investors are accumulating Bitcoin during the price correction. The proportion of long-term holders has reached a historical high of 78%, a phenomenon often seen at market bottoms. Bitcoin ETFs saw a net inflow of $850 million in the past week, with BlackRock's IBIT fund alone attracting over $300 million in a single week. This phenomenon of price decline accompanied by increased volume often presages a market reversal.
On a global monetary policy level, despite the weakening expectations for a Fed rate cut, the European Central Bank, the Bank of Japan, and several emerging market central banks are still pursuing easing policies, providing a favorable macro environment for alternative assets like Bitcoin. In the context of rising inflation expectations, Bitcoin's properties as digital gold may be further strengthened.
The cryptocurrency Fear and Greed Index has fallen to below 20, entering an extreme fear zone, a sentiment that often marks the approach of market bottoms. Historical data shows that when this index drops below 20, the probability of Bitcoin rising in the following month exceeds 80%. While macroeconomic uncertainty may continue to pressure prices in the short term, the fundamentals of Bitcoin remain strong in the medium to long term, with increased institutional adoption, technological innovation, and improvements in the regulatory environment providing momentum for its value growth.
