The rollercoaster of the cryptocurrency world: The magical day when institutions quietly buy the dip while retail investors are liquidated.
Today's cryptocurrency market is like a cup of cappuccino that hasn't been stirred—after the surface bubbles burst, only the bitter espresso remains. Bitcoin just reached a historic high of $124,500, only to plummet to $117,000; Ethereum fell below $4,400, with 230,000 people liquidated for $1.062 billion within 24 hours. Behind this intertwining drama of ice and fire, five major events are reshaping market logic.
First, the Federal Reserve removes shackles: the channel for banks to enter is officially opened.
The Federal Reserve announced the termination of the "new activity supervision program" established during the Biden administration, which previously required banks to obtain special approval before engaging in crypto business. Now, the review will return to normal procedures, meaning traditional financial institutions face significantly reduced barriers to entering the cryptocurrency space.
Deep meaning of policies:
Signal of regulatory confidence: After two years of experimentation, the Federal Reserve believes it has mastered the risk management capabilities for banks participating in crypto business, and does not need "special care."
The green light for traditional capital to enter: Cases like JPMorgan upgrading on-chain settlement and BlackRock issuing on-chain government bond funds will transition from "pilot" to "norm." The liquidity injection from the banking system may last longer than retail funds, but it also means that the cryptocurrency market's volatility will be more constrained by Federal Reserve policies.
Contradiction point: Policy benefits have not boosted coin prices—Bitcoin still fell 0.8% after the news was announced. The market seems to be asking: "Is the easing enough? Or do we need a stronger policy stimulus?"
Second, ETF trading volume skyrockets: Institutions are "quietly buying the dip."
While retail investors lament the collapse, institutions are quietly taking action: Bitcoin and Ethereum spot ETF trading volumes exceeded $40 billion in a single week, setting a record high. Among them, the Ethereum ETF stood out with a trading volume of $17 billion in one week, "like a suddenly awakened giant beast."
Underlying logic:
The 'yield-bearing asset' attribute of Ethereum: Since switching to the PoS mechanism, institutions view ETH as "digital government bonds," earning an annual yield of 4% to 6% through staking, attracting long-term funds.
Hedging retail panic: The trading volume of ETFs surged during the crash, showing that institutions are seizing opportunities to build positions. Bloomberg analysts describe: "The whales' stomachs are silently expanding."
Third, the massive cleaning of Hong Kong's stablecoins: the pains and opportunities of the compliance era.
The Hong Kong Monetary Authority and the Securities and Futures Commission jointly declared, placing 'hell-level shackles' on the stablecoin market: license approvals will adopt "extremely high standards," emphasizing that "communication ≠ approval." This move directly targets the speculative frenzy caused by using licenses for speculation.
Industry impact:
Short-term growing pains: The trading volume of Hong Kong OTC stablecoins plummeted by 33% in a week, with small and medium projects facing exit.
Long-term reshuffling: Projects using the ERC 3643 protocol (such as the mUSD proposed by MetaMask) will receive policy premiums, as this protocol can embed functions like freezing suspicious transactions into the token's DNA.
Cross-border dividends: Offshore RMB stablecoins (CNH) become a new vehicle, with Shenzhen piloting digital RMB's two-way exchange costs reduced by 30%, opening up the incremental market for compliant players.
Fourth, Layer 2 and RWA: 'Anti-dip stars' amidst the plunge.
Despite the market correction, Layer 2 and the real-world asset (RWA) sector are strengthening against the trend.
Layer 2 ecosystem explosion: Mantle (MNT) rose 25.77% in a single day, and Zora (ZORA) skyrocketed 34.35%. The core driver is the daily transactions on the Ethereum chain exceeding 1.87 million, with congestion pushing up L2 demand.
Heating up the RWA sector: Pendle (PENDLE) and Keeta (KTA) surged over 26%, with the Hong Kong RWA registration platform promoting tokenized financing for photovoltaic contracts and other real assets, attracting safe-haven funds.
Insight: During market downturns, funds are shifting from meme coins to sectors with "real revenue narratives."
Fifth, the culprit of the crash: leveraged strangulation and macro changes.
The trigger for Bitcoin's recent plunge was the 0.9% month-on-month surge in the U.S. PPI in July (expected 0.2%), extinguishing the expectation of a rate cut in September. But the deeper reason is the chain collapse of leveraged long positions.
Liquidation transmission chain: Macro bearish → price plummets → high-leverage long positions are forcibly liquidated → selling pressure intensifies → more liquidations.
Distorted funding rates: The ETH perpetual contract rate reached 0.1% per hour (equivalent to an annualized 876%), with long positions paying hefty fees and shorts facing liquidation risks, creating a "double kill" pattern.
> A DOGE whale triggered a 10x leverage liquidation due to a 10% price fluctuation, instantly evaporating $3 million—this is a microcosm of the current market: the more intense the celebration, the more brutal the liquidation.
Investment perspective: Finding a balance between ice and fire.
Short-term vigilance against volatility: If Bitcoin loses the $117,500 level (Fibonacci 38.2% retracement), it could trigger algorithmic selling; Ethereum needs to hold the $4,450 neckline. Leverage players should keep their positions below 5%.
Mid-term embrace of compliance: Hong Kong's ERC 3643 stablecoins and the dividends from U.S. banks entering the market will create a new trillion-dollar sector. Compliance leaders like Circle (issuer of USDC) may become the biggest winners.
Long-term bets on integration: If the RWA sector opens traditional asset channeling onto the blockchain, it will bring in hundreds of billions of new funds. Focus on public chains like X Layer that specialize in RWA—after all, when "photovoltaic panel power rights" can be tokenized for financing, the rules of the financial game have been rewritten.
Today's cryptocurrency market perfectly illustrates the cruel dialectic of capital markets: while 230,000 people wail in the leverage graveyard, institutions holding ETFs are laughing as they pick up bloody chips. History keeps repeating itself, yet few learn the lesson—policy-supported technological revolutions will eventually crush speculative bubbles, while compliance is the strongest trump card in a bull market.
If you are experiencing a decrease in your account balance at this moment, remember: the true winners are often those who still have chips waiting for dawn when others are liquidated.
