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1. The 'Black Monday' after the announcement of the trade agreement

On October 31, U.S. President Trump announced that the U.S. and China reached a phased trade agreement, putting aside the plan for '100% tariffs on China' and reducing the current 57% tariff to 47%, officially starting a one-year trade truce. This news was initially viewed by the market as a 'stabilizing pill' for risk assets—after all, the tariff threats in mid-October had triggered a massive liquidation of $19 billion in the cryptocurrency market in a single day. However, after the good news was realized, Bitcoin briefly fell below $109,000 during trading, down over 8% from the previous day; Ethereum also dropped to $37,000, down 7.2% for the day, marking the largest single-day drop in nearly a month. Even more unexpectedly, just one day before the official announcement of the agreement, when U.S. Treasury Secretary Mnuchin signaled 'successful negotiations,' Bitcoin briefly rebounded to $121,000 but ultimately failed to hold its gains. This 'good news turning into bad news' reversal hides three layers of deep logic.

2. The threefold logic behind the sharp decline.

1. Overdrawn expectations and reality gap: the good news has long been priced in.

Since the positive signals from the China-US economic and trade negotiations in late October, the cryptocurrency market has already digested most expectations in advance. Glassnode data shows that after the progress of the negotiations was announced, Bitcoin rebounded from $98,000 to $120,000, with a cumulative increase of 22%. However, the final agreement did not exceed market expectations: the reduction in tariffs was limited (from 57% to 47%), and it did not address core issues of long-standing disputes such as technology trade and rare earth export controls. Cryptocurrency analyst Checkmate pointed out: "The agreement lacks incremental information, and investors chose to take profits and exit."

Historical patterns also corroborate this phenomenon: during the China-US trade negotiations in 2023, Bitcoin experienced brief increases at the beginning of each "progress" but whether the upward trend can be sustained ultimately depends on the substantive content of the agreement. This "ceasefire" is merely a short-term stop to hostilities, rather than a resolution of structural contradictions, leading the market to quickly shift to selling.

2. The Federal Reserve "douses cold water": the sudden cooling of rate cut expectations triggers capital outflows.

Although the trade agreement alleviates geopolitical risks, the Federal Reserve's policy shift has become a "fatal blow" to the cryptocurrency market. After the FOMC meeting on October 31, Powell clearly stated that "inflation remains above target, and the probability of a rate cut in December is uncertain," directly shattering the market's fantasies of a 25 basis point rate cut by the end of the year. The CME FedWatch tool shows that the expectation of a rate cut in December plummeted from 73% to 41%.

As a typical high-volatility asset, cryptocurrencies are extremely sensitive to liquidity. When expectations of a tightening dollar liquidity rise, funds quickly shift to short-term government bonds, gold, and other safe-haven assets. CoinGlass data shows that the funding rate for Bitcoin futures plummeted from 0.05% to -0.03%, indicating a worsening game between long positions closing and short positions increasing.

3. Shrinking domestic demand in the US: ETF funds withdrawing and buying power exhausted.

Aside from macro factors, structural changes in the domestic US market have also become the "last straw" that broke the bulls' backs:

- ETF funds continue to flow out: the US spot Bitcoin ETF has seen net sales for seven consecutive days, with an average net outflow of about $30.7 million over the week; the Ethereum ETF has seen a near halt in fund inflows since August, with a cumulative net inflow of only $120 million from August to October, far below the monthly average of $350 million in the first half of the year.

- Spot premium disappears: exchanges like Coinbase and Kraken show that the Bitcoin spot premium has returned to zero, with some periods even experiencing negative premiums. Historical experience shows that during a bull market, US exchanges typically maintain a positive premium of 1%-3% (reflecting strong domestic demand), and the current disappearance of premiums highlights the weakness of buying power.

- Derivatives sentiment is weak: the Bitcoin three-month futures basis has dropped from 2.3% at the beginning of the month to 0.8%, indicating that investors prefer short-term trading rather than long-term holding.

3. Market outlook: a "structural watershed" in volatile adjustments.

Although the short-term sharp decline has raised concerns about a bear market, most institutions believe that the current market has not yet entered a trend decline. Arcane Research points out: "The easing of China-US trade can still reduce global asset volatility, but the Federal Reserve's policy path is the key variable." If future inflation data falls and rate cut expectations are reignited, Bitcoin may return to an upward channel; however, if domestic demand in the US continues to weaken, $100,000 will become a key support level.

It is worth noting that the Asian market has not fully synchronized its adjustments. The exchanges in Japan and Singapore still maintain a slight positive premium, which may provide potential support for the cryptocurrency market. However, in the short term, the market is likely to remain volatile until the Federal Reserve's policy signals or China-US trade progress provide new directions.

This sharp decline reveals the mature characteristics of the cryptocurrency market — no longer blindly chasing "geopolitical benefits," but rather more rationally assessing the substance of policies and the liquidity environment. For investors, it is essential to be wary of macro risks in the short term, but from a medium to long-term perspective, the "phased easing" of China-US trade may still provide structural opportunities for digital assets.#美联储降息 $BTC