1. The inevitability of market correction: Significant demand for technical pullbacks

  1. Profit-taking after historical highs
    After Bitcoin reached a historical high of $124,517 on August 14, the market accumulated a large amount of short-term profit. Technical analysis shows that after breaking the psychological barrier of $120,000, Bitcoin failed to hold the key support level (such as the $120,000 - $122,000 range), leading to long liquidations triggering a chain reaction. CryptoQuant data shows that Bitcoin's net unrealized profit/loss (NUPL) reached 0.57, indicating that most circulating BTC are in profit, further intensifying selling pressure.

  2. Overbought signals from technical indicators
    On the daily chart, the relative strength index (RSI) of Bitcoin exceeded 70 when breaking $124,000, entering the overbought range. Meanwhile, the Bollinger Bands expanded, and the price deviated too far from the 20-day moving average, indicating short-term pullback risks. Additionally, the 4-hour chart shows that after Bitcoin broke below the lower bound of the rising channel, it triggered technical stop-loss orders, accelerating the decline.

2. Concerns at the macro and policy levels

  1. Weakened expectations for Federal Reserve rate cuts
    The US July Producer Price Index (PPI) was higher than expected, weakening the market's expectations for aggressive rate cuts by the Federal Reserve in September. Rate cut expectations are one of the important driving forces behind the rise of risk assets like Bitcoin, and their cooling has directly led to funds flowing back from the crypto market to USD assets. Additionally, the Federal Reserve's high-interest rate policy (SOFR 4.29%, federal funds rate 4.33%) continues to drain market liquidity, intensifying the selling pressure on Bitcoin.

  2. Uncertainty in the US government's Bitcoin reserve policy
    On August 14, US Treasury Secretary Yellen stated that the government would not purchase Bitcoin through the new budget but would use the confiscated $15 billion to $20 billion in Bitcoin to fill strategic reserves. Although he later softened his stance, promising to explore a "budget-neutral" path to acquire more Bitcoin, the market remains concerned about policy uncertainty. This statement has been interpreted as a reduction in government support for cryptocurrencies in the short term, leading to a cooling of investor sentiment.

  3. Escalating global trade tensions
    The Trump administration's imposition of a 25% tariff on Canada and Mexico has raised market concerns about slowing global economic growth. Trade tensions typically lead to the sell-off of risk assets (including Bitcoin), with investors turning to safe-haven assets like the US dollar and gold.

3. Deteriorating market sentiment and capital flows push the market down

  1. Concentrated liquidation of leveraged positions
    According to XBIT data, the amount liquidated in the cryptocurrency market surged to over $507 million in the past 24 hours, with $271.07 million in Bitcoin long positions being liquidated. The chain reaction of leveraged trading amplified the decline, especially after Bitcoin broke key psychological levels (such as $115,000), further intensifying selling through the automatic liquidation mechanism.

  2. Cautious attitude of institutional investors
    Despite MicroStrategy, BlackRock, and other institutions continuously increasing their Bitcoin holdings, short-term market volatility has caused some institutions to pause their purchases. For example, the US Bitcoin spot ETF saw a net outflow of $937 million on August 19, setting a historical record, indicating that institutional investors are cashing out at high levels.

  3. Liquidity crisis in stablecoins
    The US (GENIUS stablecoin bill) requires stablecoin issuers to maintain 100% USD reserves, leading to a trust crisis regarding the liquidity of USDT and USDC. Although the USDC holding ratio increased from 5% to 12%, the expansion rate of the total stablecoin scale has not kept up with the market selling demand, causing liquidity pressure on cryptocurrencies like Bitcoin.

4. Short-term and long-term outlook: Opportunities after the correction?

  1. Short-term support levels and rebound possibilities
    Technical analysis shows that there is strong support for Bitcoin in the $110,000 - $112,000 range (the cost area for long-term holders in 2024). If this range can be held, it may trigger a technical rebound. Additionally, the daily super trend indicator support is at $115,330, and the 200-day moving average is at $116,131, providing a buffer for the mid-term trend.

  2. The long-term upward logic remains unchanged
    The halving cycle effect of Bitcoin, the support of institutional holding costs (the cost of BlackRock ETF holdings is about $69,500), and expectations of global liquidity easing (the Federal Reserve may restart rate cuts in 2025) still constitute the foundation of long-term value. Bitwise predicts that Bitcoin may break $200,000 by the end of 2025, and in an optimistic scenario, even reach $250,000.

  3. Risk Warning: Beware of further pullbacks
    If Bitcoin breaks below the support level of $110,000, it may trigger larger-scale stop-loss orders, targeting a drop to the $105,000-$107,000 range (Fibonacci 0.618 retracement level). Additionally, global macroeconomic uncertainties (such as recurring inflation and geopolitical conflicts) may continue to suppress the performance of risk assets.1. The inevitability of market correction: Significant demand for technical pullbacks

    1. Profit-taking after historical highs: After Bitcoin reached a historical high of $124,517 on August 14, a large amount of short-term profit was accumulated. Although it broke the psychological barrier of $120,000, it failed to hold the key support level (the $120,000 - $122,000 range), triggering a chain reaction of long liquidations. CryptoQuant data shows that Bitcoin's net unrealized profit/loss (NUPL) reached 0.57, with most circulating BTC being profitable, further intensifying selling pressure.

    2. Overbought signals from technical indicators: On the daily chart, when Bitcoin broke $124,000, the relative strength index (RSI) exceeded 70, entering the overbought range, the Bollinger Bands expanded, and the price deviated too far from the 20-day moving average, indicating short-term pullback risks. The 4-hour chart shows that breaking below the lower bound of the rising channel triggered technical stop-loss orders, accelerating the decline.

    2. Concerns at the macro and policy levels exacerbate market volatility

    1. Weakened expectations for Federal Reserve rate cuts: The US July PPI was higher than expected, weakening the market's expectation for aggressive rate cuts by the Federal Reserve in September. Rate cut expectations are one of the driving forces behind the rise of risk assets like Bitcoin, and their cooling has led funds to flow back from the crypto market to USD assets. Meanwhile, the Federal Reserve's high-interest rate policy continues to drain market liquidity, intensifying selling pressure on Bitcoin.

    2. Uncertainty in the US government's Bitcoin reserve policy: On August 14, US Treasury Secretary Yellen stated that the government would not purchase Bitcoin through the new budget but would use the confiscated $15 billion to $20 billion in Bitcoin to fill strategic reserves. Although he later softened his stance, the market remains concerned about policy uncertainty. This statement has been interpreted as a reduction in government support for cryptocurrencies in the short term, leading to a cooling of investor sentiment.

    3. Escalating global trade tensions: The Trump administration's imposition of a 25% tariff on Canada and Mexico has raised market concerns about slowing global economic growth. Trade tensions typically lead to the sell-off of risk assets, with investors turning to safe-haven assets like the US dollar and gold.

    3. Deteriorating market sentiment and capital flows push the market down

    1. Concentrated liquidation of leveraged positions: XBIT data shows that over the past 24 hours, the crypto market's liquidation amount exceeded $507 million, with $271.07 million in Bitcoin long positions being liquidated. The chain reaction of leveraged trading amplified the decline, and after Bitcoin broke key psychological levels (such as $115,000), the automatic liquidation mechanism intensified selling.

    2. Cautious attitude of institutional investors: Despite MicroStrategy, BlackRock, and other institutions continuously increasing their Bitcoin holdings, short-term market volatility has caused some institutions to pause their purchases. For example, the US Bitcoin spot ETF saw a net outflow of $937 million on August 19, setting a historical record, indicating that institutional investors are cashing out at high levels.

    3. Liquidity crisis in stablecoins: The US (GENIUS stablecoin bill) requires stablecoin issuers to maintain 100% USD reserves, leading to a trust crisis regarding the liquidity of USDT and USDC. Although the USDC holding ratio increased from 5% to 12%, the expansion rate of the total stablecoin scale has not kept up with the market selling demand, causing liquidity pressure on cryptocurrencies like Bitcoin.

    4. Short-term and long-term outlook: Opportunities and risks within the correction

    1. Short-term support levels and rebound possibilities: The technical analysis shows that there is strong support for Bitcoin in the $110,000 - $112,000 range (the cost area for long-term holders in 2024). If this range can be held, it may trigger a technical rebound. Additionally, the daily super trend indicator support is at $115,330, and the 200-day moving average is at $116,131, providing a buffer for the mid-term trend.

    2. The long-term upward logic remains unchanged: The halving cycle effect of Bitcoin, the support of institutional holding costs (the cost of BlackRock ETF holdings is about $69,500), and expectations of global liquidity easing (the Federal Reserve may restart rate cuts in 2025) still constitute the foundation of long-term value. Bitwise predicts that Bitcoin may break $200,000 by the end of 2025, and in an optimistic scenario, even reach $250,000.

    3. Risk Warning: Beware of further pullbacks: If Bitcoin breaks below the support level of $110,000, it may trigger larger-scale stop-loss orders, targeting a drop to the $105,000 - $107,000 range (Fibonacci 0.618 retracement level). Additionally, global macroeconomic uncertainties (such as recurring inflation and geopolitical conflicts) may continue to suppress the performance of risk assets.

    4. What are the driving factors for the decline?

      Several factors may have contributed to Bitcoin's recent decline:

      • Market sentiment and liquidation: Posts from X and market reports indicate that over $500 million in long positions were liquidated, suggesting that after Bitcoin rapidly rose to $124,517, liquidation events occurred due to leveraged trading. This liquidation event, combined with weakened hopes for interest rate cuts from the US Federal Reserve meeting, dampened bullish momentum.

      • Macroeconomic pressures: Recurring inflation concerns in the US and uncertainties surrounding global economic events (such as the Trump-Putin summit) have led investors to reduce their exposure to risk assets (like cryptocurrencies).

      • Technical levels: Breaking below the key support level of $115,000 triggered automatic sell orders according to TradingView data, exacerbating the decline. Analysts suggest that if selling pressure continues, Bitcoin may test further support near $110,000.

      Is this a healthy correction?

      Despite concerning headlines, many analysts believe this decline is a healthy correction rather than a trend reversal. Bitcoin's rapid rise to $124,517 last week was due to exuberant market sentiment and institutional buying, but such increases often lead to profit-taking. A post from @bitgu_ru on X suggests that the market may be undergoing a "healthy reset," a view echoed by some traders who see the decline as a buying opportunity.

      Historical data supports Bitcoin's resilience. After previous corrections, Bitcoin often recovers to new highs, thanks to its fixed supply of 21 million coins and the increasing institutional adoption. For example, VanEck Associates Corporation reaffirmed its price target of $180,000 for Bitcoin by the end of 2025, citing strong fundamentals.

      What should investors do?

      For those navigating this volatile market, here are some actionable insights:

      • Stay informed: Monitor reliable sources like Binance, CoinMarketCap, and CoinGecko for real-time price updates and market analysis.

      • Avoid panic selling: Short-term declines are common in Bitcoin's history. Long-term investors may consider dollar-cost averaging to mitigate volatility.

      • Conduct thorough analysis: Go beyond price charts to examine on-chain metrics, trading volume, and macroeconomic indicators for a comprehensive view of market health.

      Looking ahead

      Although Bitcoin's drop below $113,000 USDT has raised concerns, it also highlights the dynamic nature of cryptocurrencies. As the market digests this correction, traders and investors will closely watch the key support levels between $110,000 and $112,500. Whether this decline marks a buying opportunity or a deeper downturn remains to be seen, but Bitcoin's long-term prospects continue to attract optimism from both institutional and retail investors.#加密市场回调

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