Financial encyclopedia

Recently, Bitcoin has fallen below the $72,000 mark, hitting a new low in over a year. The market is rife with talk of "panic" and "crisis of faith". But is this the reality or is the market merely redefining Bitcoin's role? 

I. Is Bitcoin Still a "Safe-Haven Asset"? 

In the past few years, Bitcoin has been described as "digital gold", emphasizing its anti-inflation and hedging against systemic risks. However, from the recent market trends, it is evident that there has been a significant change in the actual behavior of the market. 

Data shows that the correlation between Bitcoin and the US stock market (especially the S&P 500 Index) has significantly increased, once approaching 0.5. Simply put, when the stock market drops, Bitcoin often falls along with it. 

What is more worth noting is that while gold and silver have reached new highs amid rising geopolitical risks, Bitcoin has continued to come under pressure. This reflects that the market currently views Bitcoin more as a high-volatility risk asset rather than a true safe-haven tool. 

II. Enterprises and ETFs Are Amplifying Market Volatility 

Another factor that is easily overlooked is who is holding Bitcoin. 

At present, nearly 200 listed companies hold Bitcoin. These holdings need to be accounted for "at market value". When the price rises, these Bitcoins appear as assets; but when the price drops significantly, they will directly become a burden on the financial reports. 

Imagine a situation: If Bitcoin drops another 10%, the balance sheets of some enterprises might immediately deteriorate, and the risk management departments would naturally demand a reduction in holdings. Such selling would no longer be driven by retail sentiment but rather institutional selling pressure. 

As for the Bitcoin ETF, it was originally intended to bring in more long-term funds. However, when the market weakened, it also became an outlet for funds to flow out rapidly, instead intensifying short-term volatility. 

Three, what truly drove the decline was leverage and derivatives. 

From the perspective of market structure, the most destructive force behind this decline is not the spot selling pressure, but rather the chain reaction in the derivatives market. 

After the price broke through the key level, a large number of highly leveraged positions were forcibly closed. The clearing mechanism of the exchange would directly execute at the market price, causing the price to be further depressed and creating a chain reaction of continuous decline. 

This trend has a characteristic:
It can occur on its own without any new bad news.
As long as the market positions are overly concentrated, the adjustment will come naturally. 

IV. Does this mean that "faith is dead"? 

Not necessarily. But it is certain that the market's view of Bitcoin is changing. When an asset is traded as a risky asset, its price is more influenced by liquidity and market sentiment rather than being propped up solely by concepts or stories. 

Rather than being a "collapse of faith", it is more of a correction to overly optimistic narratives. 

What is most worth noting about the current decline in Bitcoin is not the short-term price it will fall to, but whether the market has completed a transformation - from being expected to be a safe-haven asset to having to bear the volatility of a risky asset. 

When the roles change, the price behavior will naturally be rewritten.