Bitcoin has again stepped on a key support, and the atmosphere of the entire market has instantly shifted from optimism to panic. But have you ever thought about whether such a big dump really means a crisis is coming, or does it instead signify something different?

The market has indeed been quite fierce these past couple of days. Bitcoin has fallen below $86,000, and Ethereum has been smashed down to below $2,830, leaving the market in a sea of red. The data is even more heart-wrenching: nearly 180,000 people were forcibly liquidated within 24 hours, with $537 million evaporating in an instant. Among them, the amount of long liquidations reached $470 million, and the most outrageous single liquidation even exceeded $14 million. Looking at these numbers, many people's mental state has collapsed.

However, after spending time carefully analyzing this data, I reached a completely opposite conclusion – this wave of simultaneous falls in the market is less about the beginning of a crash and more about the last washout before the start of a big cycle.

**Where does the panic on the surface come from**

Let's first talk about the direct cause of this big dump. The attitude of the Federal Reserve has changed, and this is the core. Recently, several Federal Reserve officials have been sending hawkish signals, and their attitude towards interest rate cuts at the end of the year has clearly turned cautious. As a result, the market's expectation of the probability of an interest rate cut in December has fallen to below 40%.

With expectations of reduced liquidity easing, highly volatile crypto assets are the first to suffer. Institutional investors have no choice but to cut positions and withdraw leverage. This creates a vicious cycle—liquidations trigger a fall, and the fall triggers more forced liquidations.

At the same time, the performance of the Bitcoin spot ETF has been quite awkward. Over here in the US, last week's net inflow was only $70 million, which is lukewarm. Worse still, a total of $4.6 billion has flowed out over the past month. The continuous outflow of funds is like a warning bell for the market.

The strangest phenomenon is that gold and Bitcoin have both fallen together. This usually only happens in extreme situations—when the liquidity of the entire market is tightening, even safe-haven assets cannot withstand the pressure. This is indeed a bit nerve-wracking.

**But the logic hidden here is different**

Upon careful consideration, the composition of participants in this big dump is quite interesting. The main ones being liquidated are still those retail investors and small institutions holding high leverage. They are aggressive when chasing high prices and just as aggressive when liquidating after being stuck. This pressure generated by passive liquidations, although quite forceful in the short term, actually appears to be actively creating momentum from the perspective of large funds.

A key detail is: institutional investors are positioning themselves on dips. Although there has been outflow from ETFs, this reflects more of a decline in risk appetite rather than a denial of Bitcoin itself. In fact, the real big players will quietly accumulate positions at this point, preparing chips for the upcoming market.

At the current position, the nature of the clearing has become very obvious. Those aggressive leveraged positions have been wiped out, and the speculative atmosphere in the market has been cleaned up, instead creating space for truly patient capital. Historically, before every wave of a major market movement begins, there is almost always a "panic moment" — the most dangerous looking time is often the time with the most opportunities.