According to data from multiple sources, Bitcoin fell by 3.1%, reporting $121657; Ethereum fell by 4.1%, reporting $4515; Solana fell by 5.1%, reporting $223.55; Dogecoin fell by 6.18%, reporting $0.2516; XRP fell by 4.82%, reporting $2.88.

What is more worth noting is that this decline occurred against the backdrop of Bitcoin just reaching an all-time high.

On October 5, Bitcoin just reached an all-time high of $125300, and within just two days, it reversed downward, with market sentiment changing rapidly.

The cryptocurrency concept stocks in the Hong Kong stock market also saw significant declines, with Boyaa Interactive down 8.74%, Okex Chain down 7.69%, and LanKong Interactive down 5.63%, indicating that the traditional financial market has also reacted to this cryptocurrency pullback.

02 Behind the Plunge: Three Major Factors Point to a Cooling Market

The rebound of the US dollar suppresses risk assets

The US dollar index reached 104.8, hitting a nearly two-week high, as rising real interest rates diminished the appeal of non-yielding assets like gold and Bitcoin.

In this context, funds are flowing back to US dollar assets, which significantly suppresses the cryptocurrency market. Morgan Stanley warns that if the US dollar index breaks 105, Bitcoin may further retrace to $115,000.

Profit-taking and Leverage Liquidation

After Bitcoin hit an all-time high, the short-term rise was too large, naturally triggering the leverage funds to reduce their positions.

CME Bitcoin futures open interest dropped to $3.8 billion, showing significant pressure on long positions. On-chain data also shows that on October 7, three whale addresses collectively reduced their holdings by 12,000 Bitcoins, worth approximately $150 million.

Tightening regulatory expectations

The US SEC will review applications for spot ETFs for Solana, XRP, and others the next day, with market concerns that regulatory attitudes may tighten.

At the same time, the US Treasury released a draft regulation for stablecoins, requiring issuers to hold 100% cash reserves, raising market concerns about this policy change.

03 Chain Reaction: Risk Assets Suffer Collectively

This round of retracement is not limited to the cryptocurrency market; traditional risk assets have also experienced a synchronized decline.

London spot gold dropped below $3,900 during trading, hitting a low of $3,892, down 1.2% on the day, falling in sync with Bitcoin.

The Nikkei 225 index fell 1.1% on the same day, with the appreciation of the yen putting pressure on export stocks. The Chicago Board Options Exchange VIX index rose to 20.8, a nearly two-week high, indicating a general increase in market risk aversion.

This synchronized decline indicates that funds are generally choosing to take profits near historically high levels, and the overall risk appetite is cooling down.

04 Institutional Perspective: Can Short-term Volatility Mask Long-term Trends?

Despite the significant market correction, major financial institutions have not turned bearish.

Goldman Sachs maintains its Bitcoin year-end price target at $135,000, believing that short-term retracements are healthy corrections, but volatility will rise above 80%, advising investors to reduce leverage.

Morgan Stanley raised its Bitcoin price target to $140,000, but warned that if the US dollar index breaks 105, Bitcoin may retrace to $115,000.

UBS suggests that investors buy in batches near $120,000, setting a stop-loss at $118,000, with a target looking towards $135,000.

The joint report from Bybit and Block Scholes also points out that despite uncertainties in the macroeconomy, cryptocurrency assets have shown resilience in the spot market.

05 Market Outlook: How to Position During High Volatility Periods

For different styles of investors, strategies should have differentiated considerations.

For ordinary investors, high-leverage contracts should be avoided; it is preferable to choose spot or ETFs, buy in batches, and set a stop-loss at $118,000.

Traders may focus on the changes in CME futures discounts; if discounts continue to widen, short-term short hedges may be considered. Long-term allocators should control their positions within 10% of total assets.

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A super cycle does not mean one-sided growth; high volatility is the norm in the cryptocurrency market. With the strengthening US dollar and ongoing uncertainty in regulatory policies, the cryptocurrency market may face a more turbulent fourth quarter.