The big bearish candle the day before yesterday on Ethereum's chart shocked many people. Some in the group wanted to buy the dip, while others were eager to cut losses, and there were all kinds of opinions. But to be honest: instead of blindly guessing based on the candlestick chart, it's better to understand the true driving forces behind it.

Having analyzed crypto assets for eight or nine years, I’ve discovered a pattern: ETH’s price fluctuations largely depend on policy signals. Compared to stocks and gold, cryptocurrencies are much more sensitive to regulatory cues, especially for mainstream coins like Ethereum with the strongest global liquidity. Any policy adjustment by a major economy can trigger a chain reaction in the market.

Last year, the European crypto asset service law draft was announced and immediately hammered down — Ethereum dropped 12% that day. But this wasn’t due to technical issues; it was because institutional investors were worried about rising compliance costs and rushed to exit first. Here’s a detail many people haven’t thought through: policy impacts are not black and white. The key is whether the policy is a “blanket ban” or “regulatory guidance.”

Compare that with an Asian country that implemented a transaction filing system which seemed strict at first glance, but in fact cleared out wild-growth platforms. The compliance crowd gained more confidence to enter, and Ethereum subsequently rose by 8%. This is what the market often calls “bad news is good news”—seemingly negative, but actually clearing out the market.

Another easily overlooked point: the movements of global central banks. When they cut interest rates and loosen monetary policy, risk assets tend to rise, and ETH benefits accordingly. When they tighten by raising interest rates, investors shift to safe havens, putting pressure on ETH. The logic is quite straightforward; many people just haven’t connected these two lines.