Plain Language Explanation: Why Did Bitcoin Drop Recently

This wave of Bitcoin decline wasn't caused by a single reason; it’s more like several cold showers poured consecutively, cooling down the market enthusiasm. Specifically, there are four key points:
1. The Federal Reserve poured the "coldest water"
Bitcoin is now basically "dependent on the Federal Reserve's stance." Previously, the market believed that interest rate cuts would continue in December, making money more "loose," and many people increased their positions in anticipation of price rises. However, Federal Reserve Chair Jerome Powell directly said, "Don't assume future rate cuts," and it's uncertain whether there will be a cut in December.
Once this statement was made, everyone's optimistic expectations immediately reversed. Previously, the probability of a rate cut in December was nearly 100%, now it has dropped to around 60%. Coupled with the U.S. government shutdown, key economic data couldn't be released, and investors, like driving with their eyes closed, dared not touch high-risk assets like Bitcoin, opting to withdraw their assets and seek safety first.
2. Major institutions led the "run"
Previously, Bitcoin's rise was mainly supported by large institutions. But recently, institutions have started collectively cashing out and leaving. The most obvious example is Bitcoin spot ETFs — the main channel for institutional entry. Last week alone, $607 million flowed out, wiping out the previous week's net inflow.
From February to now, the total size of U.S. Bitcoin spot ETFs shrank from $40.7 billion to $35.9 billion, a loss of $4.8 billion in just one month. Products from top institutions like BlackRock have been losing funds daily, and even the previously sought-after premium has turned negative, indicating that both large institutions and retail investors are selling rather than buying.
3. Technical signals "turn red," scaring off investors
Those familiar with market trends are watching the "death cross" signal — when the short-term moving average falls below the long-term moving average, which is usually seen as a "signal of decline" in the market. Bitcoin has just experienced this situation.
Moreover, key price levels have been breached one after another, falling from a high of $126,000 to around $107,000, a decline of over 15%. Technical investors, seeing this trend, either rush to sell or dare not enter the market. With more selling, the price naturally can't hold up.
4. Hacker attacks became the "last straw"
Amid the market's panic, decentralized trading protocol Balancer was suddenly attacked by hackers, with total losses reaching $120 million. Although the official said they would compensate, this hit the market's pain point — concerns about the technical security of cryptocurrencies. When a real incident occurs, people are even less willing to hold, and they rush to sell to seek safety.
This incident also triggered a chain reaction, with crypto-related stocks falling, damaging overall confidence in the sector. Plus, over 310,000 traders were liquidated within 24 hours, with $1.2 billion evaporating. The spreading panic forced more people to dump their assets, creating a vicious cycle. #Gate新一期储备金报告出炉 #参与创作者认证计划月领$10,000 #December rate cut forecast