From October 11 to October 13, the volatility in the cryptocurrency market was driven by a combination of high leverage accumulation and fluctuations in macro expectations. Over the past two months, the funding rates have remained positive for an extended period, and the open interest in futures has repeatedly hit new highs, leading to an overcrowded market. The trigger came from a macro-level shock, as the U.S. suddenly announced plans to impose a 100% tariff on imports from China, triggering a global panic sell-off of risk assets and a chain reaction of liquidations. According to CoinGlass data, the total liquidation amount across the network reached approximately $19.1 billion in a single day, with over 1.6 million trading accounts being forcibly liquidated, marking the largest single-day liquidation wave of the year. The good news is that although the deleveraging process was painful, it quickly cleared systemic risks. As of October 13, the price of Bitcoin, after experiencing severe fluctuations, was reported at approximately $113,800 (data source: CoinGecko), showing a significant rebound from the low two days prior. Signals from both on-chain and derivatives markets indicate that the market has shifted from passive panic to an active recovery phase, with a healthier structure and an increase in the proportion of long-term funds.
On-chain funds: Market selling pressure significantly eased, bottoming signals emerged
After the flash crash, the market did not remain in panic for long. BTC quickly stabilized and rebounded, with some institutional accounts seizing the opportunity to increase their positions in BTC and ETH. On-chain funds indicate that during the crash, mainstream stablecoins USDT and USDC experienced premiums in the secondary market. This week, the total market capitalization of stablecoins did not significantly decrease; instead, there were signs of a slight increase, indicating that some funds switched from crypto assets to stablecoins during the risk event and chose to stay on the sidelines. Meanwhile, discussions within the crypto community have picked up, with the topic of "buying the dip" surging nearly twofold, showing that market participants' sentiment is gradually recovering. In the crypto market, this transition from panic to hesitation often signifies that a bottoming area is forming.
On-chain data clearly shows that the market is transitioning from panic to recovery, with three key signals: First, selling pressure has significantly eased. The proportion of BTC held on exchanges has dropped to about 14%, a multi-year low, with more and more Bitcoin being transferred to cold wallets, reducing the short-term sellable chips; Second, funds have not exited. Although USDT and USDC experienced a brief premium during the crash, reflecting a rise in risk-averse sentiment, the total market capitalization of stablecoins not only did not decrease but instead showed a slight increase, indicating that funds are still on the sidelines; Third, long-term holders remain steady. The proportion of "old chips" holding BTC for over a year is still close to historical highs, and they did not panic sell during the severe fluctuations, while the exit of short-term speculators has made the market's chip structure healthier. Overall, the short-term panic selling has passed, funds are still waiting for opportunities, and long-term funds are stabilizing, which is an important signal for market bottoming.
Options market: Stabilization signals, but risk-averse sentiment remains
The options market quickly adjusted after this round of sharp declines, showing several obvious changes: market panic sentiment has significantly eased. The "implied volatility (IV)" that measures price fluctuation expectations has significantly retreated in the short term, indicating that traders believe the phase of severe volatility is basically over. However, risk-averse demand still exists. The prices of put options to guard against declines remain significantly higher than those of call options, and more funds are flowing into contracts expiring at the end of the year, indicating that investors are still guarding against the market testing new lows again. The reassuring news is that the "passive liquidation" risk triggered by derivatives has basically been eliminated. According to market predictions, as long as Bitcoin maintains a range of $110,000 to $120,000, the previous vicious cycle of "selling more as prices drop" is unlikely to repeat. Overall, the options market does not expect extreme conditions in the short term, but investors' cautious mindset has not dissipated.
Capital flow: Value assets demonstrate resilience
In this market correction, the performance across various sectors has shown clear differentiation, confirming the trend of "capital returning from speculation to value." Major cryptocurrencies have demonstrated strong resistance to declines. BTC and ETH saw maximum declines of 15% and 20%, respectively; although they were not spared, the volatility was much smaller than that of most small-cap tokens. The increase in Bitcoin's dominance further indicates that capital is flowing from altcoins to core assets. Sectors with real value have performed steadily. RWA (Real World Asset tokenization), anchored to physical assets, experienced relatively limited declines; platform tokens rebounded quickly supported by trading volume, showing the fundamental support. In contrast, purely speculative assets saw significant declines, with some nearly reaching zero and struggling to rebound. This indicates that market sentiment is becoming more rational, with investors focusing more on the actual value and application prospects of projects. Overall, this round of adjustment is a natural process of market de-bubbling. Quality assets will continue to be favored, while targets lacking substantial support should be approached with caution.
Strategic insights: Structured thinking may become a more critical dimension
After the market experiences severe fluctuations, the advantages of structured products become more pronounced. For investors who wish to participate but do not want to bear excessive volatility risk, dual-currency wealth management, snowball structures, or range income products can lock in stable returns within a fluctuating range. The current market resembles a "low-volatility recovery period," where heavy bets on rebounds may be less favorable than stable layouts. Investors can combine their risk preferences to build a "low volatility + enhanced returns" allocation framework through phased entry and product combinations. A strategy that balances offense and defense with flexible allocation is the best approach during a period of cyclical transition.
This flash crash has reshuffled the market and rapidly evaporated the bubble. With institutions returning and on-chain structures stabilizing, the crypto market is entering a new equilibrium phase. Matrixport will continue to monitor changes in the macro environment and market structure, assisting investors in navigating the new cycle of digital assets steadily.
The above content is from Daniel Yu, Head of Asset Management, and represents the author's personal views.
Disclaimer: The market has risks, and investment should be cautious. This article does not constitute investment advice. Trading in digital assets may involve significant risks and volatility. Investment decisions should be made after careful consideration of personal circumstances and consultation with financial professionals. Matrixport is not responsible for any investment decisions made based on the information provided in this content.
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