Author: Blockchain Knight; Source: X, @Knight_in_Block

Bitcoin’s sharp decline seems to be a deep hole created by a sudden black swan, but in fact it is the long-dried liquidity in the market that has hit the ice of the external geopolitical crisis.

Before the shots were fired in the US-Iran conflict,the recovery engine within the crypto market had effectively stalled.

The number one problem faced by Bitcoin before was the barrier lake stuck between 75,000 and 80,000. This range brings together the cost line of short-term holders and the true average of the market, and is a battleground between bulls and shorts.

ThenOver the past two weeks, US spot ETFs have coldly siphoned off $2.26 billion. What is even more dangerous is that the data on the chain began to flow backwards. More than 100,000 Bitcoins flooded back to the centralized exchanges like a tide, while stablecoins representing purchasing power fled at a rate of more than 150 million US dollars every day.

This is not an ordinary adjustment, but a textbook double hedging. Like a siege, the number of chips available for selling in the city is increasing, but the funds outside the city ready to take over are decreasing.

This fragile balance was eventually completely shattered by the artillery fire in the Middle East. The news of the US air strike on Iran's drone base was like throwing a tear gas into the already jittery capital market.

In the eyes of macro funds, Bitcoin at this time does not show the hedging properties of digital gold, but instead acts like an amplifier of traditional risk assets. Investors around the world are frantically taking risks in panic, and the already bleeding crypto market has naturally become the first domino to fall.

When spot prices fall below the psychological defense line, leveraged bulls in the derivatives market instantly become lambs to be slaughtered.

Within 24 hours, a liquidation storm totaling US$930 million swept across the entire network, and more than 160,000 accounts were forced to systematically liquidate their positions.

The collapse of spot derivatives also triggered a collective jump ship among Wall Street elites. The U.S. spot Bitcoin ETF suffered structural hemorrhage for eight consecutive trading days, directly knocking the ETF's total asset management scale below the $100 billion mark.

In this escape, the former gold-absorbing behemoth, IBIT, a subsidiary of BlackRock, became the biggest bleeding point, spitting out a record $527 million in a single day, taking the lead in completing this tragic institutional retreat.

The storm has passed, and the market is standing at the crossroads of destiny. The game between the long and short parties is evolving into a confrontation between two narratives.

As Nansen analysts said, history does not repeat itself, but it always rhymes with the same. Price disruptions caused by geopolitical conflicts usually come and go quickly. As long as the war does not spread into a full-scale war and the geopolitical premium is digested by the market, Bitcoin can often repair itself. This is more like a technical shock caused by high leverage.

On the other hand, CryptoQuant’s on-chain analysts are even more worried. They noticed that the currency accumulation mechanism established by retail investors and institutions since the spring has been fundamentally damaged.

Of course, if Bitcoin wants to get out of the gloom, it depends on when the smoke in the Middle East dissipates in the short term, allowing tight macro sentiment to breathe.

ButIn the long run, only when Wall Street’s ETFs turn on the green light to buy again and real demand in the spot market returns, will this decline not turn into the prelude to a new round of bear market.