With the end of the National Day holiday and the U.S. market coming out of the weekend, the crypto market, which has maintained low volatility for many days, also seems to be waking up.

Starting at 17:30 Beijing time, Bitcoin, which has failed to break through 28,000 USDT several times recently, began to fall from 27,800 USDT and fell to a low of 27,435 USDT. During the same period, Ethereum also fell below 1,600 USDT, reaching a low of around 1,583 USDT, a new low in nearly half a month.

At the same time, Coinglass data showed that the entire network had a liquidation of more than 50 million US dollars in the hour before and after this fluctuation, of which Bitcoin liquidation was about 9 million US dollars, Ethereum liquidation was about 8 million US dollars, and BCH liquidation was about 2.7 million US dollars.

In general, although the overall decline was not large, the amount of liquidation exceeded 50 million.

The position density of the US dollar, that is, the unit price, is relatively large, which may indicate that under the background of continued low volatility, everyone has begun to gamble on the expected trend that the crypto market will soon move out of the shock range.

What are the reasons for the plunge?

Ethereum Foundation "selling coins"?

Before this round of decline, the Ethereum Foundation address exchanged 1,700 Ethereum for USDC through Uniswap.

Overall, the total amount of the Ethereum Foundation's transaction is not large, so this move has a significant impact on market sentiment.

The impact of the stock market is far greater than the actual selling pressure.

The USDC sold by the Ethereum Foundation is currently in a multi-signature address. Based on the recent transactions of this multi-signature address, it is not ruled out that it will be purchased for rETH in the near future.

However, it is worth noting that since late August, Ethereum founder Vitalik Buterin has transferred ETH to exchanges such as Bitstamp, Coinbase, and Kraken many times. According to incomplete statistics, the total amount has exceeded 2,900 ETH.

The potential impact of the Middle East conflict on the Fed's rate hike process

On October 7, the largest conflict in recent years broke out between Palestine and Israel, with a new round of military conflict between the Palestinian Islamic Resistance (Hamas) and Israel, increasing the possibility that geopolitical risks in the Middle East will drag down global oil supplies.

As of around 7 p.m., U.S. WTI crude oil futures prices rose 3.78% to $85.92 per barrel; Brent crude oil futures prices rose 3.36% to $87.67 per barrel.

Alpine Macro, a global investment research firm, pointed out that if the conflict expands, it may cause oil prices to continue to rise. In the most extreme case, if Israel attacks Iran's nuclear facilities, oil prices may soar to more than $150 per barrel.

This will undoubtedly make the US's anti-inflation process worse, and in turn increase the possibility that the Federal Reserve will choose to continue raising interest rates in the future. Therefore, as a "risky asset", Bitcoin's decline seems understandable due to the strengthening expectations of interest rate hikes.

However, the duality of Bitcoin as a "safe haven asset" and a "risk asset" has always been a paradoxical topic. You know, despite the current geopolitical turmoil, Bitcoin has not seen a sharp rise due to its "safe haven asset" attributes.

But in the first week of 2020, the situation in the Middle East also escalated suddenly (Iranian senior military officer Soleimani was killed in a US missile attack). Bitcoin soared by more than 5% that day amid the tense situation, and then continued to rise, perfectly proving the safe-haven asset attributes of "digital gold".

Bitcoin and the U.S. stock market show a clear positive correlation after 2022:

There is indeed some correlation between the two, but I think the logic behind them is different - the common logic behind the rise in the past is that there is a lot of money in the market, but the market logic behind Crypto is to fight inflation, and the market logic behind the US stock market is economic recovery. The entire US stock market is basically supported by certain large stocks, especially technology stocks, while other stocks are tepid.

The common logic behind the decline is that inflation has caused the Federal Reserve to tighten monetary policy, raise interest rates and even shrink its balance sheet, resulting in a lower market tolerance for market risks and prompting money in the market to flow from high-risk assets to low-risk assets.

First, when the market is volatile and the market trend is uncertain, seemingly unrelated asset classes will show a higher correlation. In fact, in addition to BTC, gold and bonds have also shown an increasingly positive correlation with US stocks in recent years. Second, the cryptocurrency market is becoming more mature, and its penetration into mainstream investment has accelerated. Coupled with the impact of policy supervision, this may be a normalized trend in the future.

I personally prefer the second one. I think Bitcoin is still moving independently, but investment sentiment indirectly caused volatility synchronization over a certain period of time.

Answering the most frequently asked questions recently:

1. In terms of price positioning, I personally think that you can start to deploy BTC and ETH now, buy on dips and purchase on dips.

2. It is not the right time to deploy a copycat. My consistent thinking is to wait patiently and keep at least 20% of the positions. When the mainstream coins gain momentum, the tracks start to rotate, and big opportunities appear in certain tracks, it is the best time to launch a large-scale attack. Now is not a good choice.

3. The socialfl and bot tracks that have become popular recently have basically no narrative space and no big opportunities. I tend not to participate and calm down in the hustle and bustle to concentrate on judging the possible opportunities of L2 in the future. As for whether to buy at the bottom, I will definitely not touch the copycat at present. The best choice now is to stay put and be patient!

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