Output | Top Finance
Author | Zhong Jingxuan
Introduction: The End of the Feast or a Halftime Break?
Bitcoin has once again reached historical highs, and the market has fallen into collective frenzy.
But behind the frenzy is an unprecedented tug-of-war between bulls and bears. On one side is the optimistic expectation of continuous inflow of institutional funds, while on the other is the cold reality of tightened regulations and technical bottlenecks.
As retail investors immerse themselves in the fantasy of financial freedom, whale accounts have quietly reduced their holdings. Is this bull market genuine prosperity or false carnival? The answer lies in the overlooked details.
01
Market Reflection: The Divided Landscape Behind the Data
The upward curve on the candlestick chart seems to narrate the victory of capital consensus, but on-chain data reveals another truth: the number of long-term holder addresses has declined for three consecutive weeks, while the stock of Bitcoin on exchanges has reached a new high for the year. This indicates that smart money that entered early is distributing its chips to retail investors chasing higher prices.
Finance ministers from multiple countries have recently joined voices to strengthen cryptocurrency tax regulation, while the U.S. SEC has once again postponed the Bitcoin ETF resolution. Although some listed companies continue to announce their allocation of Bitcoin assets loudly, the number of new institutional buyers has shrunk by 40% from its peak. The narrative of institutional entry is starting to show cracks.
The migration of computing power triggered by the Chinese mining farm shutdown has not yet been completed, and North American mining farms are facing uncertainties due to energy policies. The overall network's hash rate volatility has breached the warning line, trading confirmation speeds have slowed down, and network congestion fees continue to rise. Bitcoin's fundamental function as a payment tool is being devoured by its speculative nature.
02
The pillars of the bull market are starting to weaken
The Federal Reserve's tapering countdown hangs like a sword of Damocles, and the volatility index in traditional financial markets has reacted in advance. Historical data shows that during periods of monetary policy tightening, Bitcoin's correlation with the Nasdaq index reaches as high as 0.8. When tech stocks start to de-bubble, cryptocurrencies cannot remain unscathed.
The funding rate for perpetual contracts remains at an excessively high level, with the number of open futures contracts breaking historical extremes. This extreme leverage state could trigger a chain of liquidations with just one catalyst. The lessons from the flash crash on October 11 indicate that the vulnerability of the derivatives market far exceeds expectations.
"Digital gold" and "inflation hedge" narratives have been told for three years, but Bitcoin's actual purchasing power volatility far exceeds that of gold. Progress on Layer 2 solutions is slow, and the growth of the Lightning Network node count has stagnated. When technological evolution cannot keep pace with valuation inflation, bubbles will eventually burst.
03
Bear market signal light has turned on
Whale activity alert: addresses holding over a thousand bitcoins have seen their holdings drop to a two-year low, while off-exchange bulk trading platforms have seen multiple discounted sell-offs. These whales, who control market direction, often act three to six months ahead of regular investors.
Sentiment indicators are extreme, with the Fear and Greed Index maintaining above 90 in the extreme greed range for four consecutive weeks, and the topic volume about "Bitcoin millionaires" on social media has surged by 500%. These phenomena highly correlate with market sentiment before the historical peak in 2018.
Cracks in the ecological chain are showing, with daily average selling volume by miners doubling compared to last month, the growth rate of DeFi locked value plummeting, and NFT market transaction volumes halved. Every aspect of the cryptocurrency ecosystem is sending dangerous signals.
04
Future path extrapolation
Possibility of a soft landing. If institutional funds can continuously hedge against retail withdrawal, Bitcoin may build a consolidation platform at the current position. This method of exchanging time for space will digest valuation bubbles and accumulate energy for the next cycle. The key observation point is whether the Bitcoin ETF can ultimately be approved.
Hard landing risk scenario: global central banks tightening liquidity beyond expectations, or major exchanges facing regulatory crackdowns, may trigger a panic exit. Technical indicators show that if a key support level is effectively breached, the downward space may exceed 60%.
The new narrative breaking point, the demonstration effect of sovereign nations listing Bitcoin as legal tender, or breakthroughs in carbon-neutral mining technology, may reshape market confidence. However, these variables are difficult to change the fundamental supply-demand dynamics in the short term.
Conclusion:
Cycle's recurrence
There is no "this time is different" in the cryptocurrency market. When taxi drivers start recommending altcoins, when mining noises echo from college dorms, and when "fear of missing out" replaces "risk aversion," it is the strongest signal to exit.
History does not repeat itself simply, but it always rhymes.
Top financial analysts believe: Bitcoin is in a critical window for bull-bear transition. The three pillars supporting the previous surge—liquidity bonuses, institutional narratives, and market sentiment—have all weakened simultaneously. Although there may be short-term technical rebound opportunities, the risk-reward ratio has significantly deteriorated.
Investors should be wary of leverage traps, appropriately reduce positions, and increase stablecoin allocations. True opportunities always belong to those who remain clear-headed in the midst of frenzy and discover value in panic.
