Global macroeconomic pressures are intensifying

In the past year, the global economic recovery has hit a bottleneck. Although inflation in the United States and Europe has eased, core inflation remains high, causing major central banks to maintain hawkish monetary policies. As Crypto Assets are highly volatile assets, they have been directly impacted by the tightening of liquidity, and may become the hardest hit area in the wave of sell-offs.

Geopolitical risks are rising

The escalation of conflicts in the Middle East, the tense situation in the Asia-Pacific region, and the unresolved Russia-Ukraine war have increased global investors’ demand for safe-haven assets. Compared to traditional safe-haven tools like gold and the US dollar, Crypto Assets have not been seen as digital gold during this volatility. Instead, due to the lack of consensus in the market and regulatory uncertainties, they have become the preferred choice for capital withdrawal. This also highlights that the Crypto market has not yet fully established its financial attributes for risk resistance.

Tightening of regulatory policies

The regulatory trends for Crypto Assets are becoming increasingly clear in various countries worldwide. The U.S. Securities and Exchange Commission (SEC) continues to strengthen its enforcement actions against crypto trading platforms and DeFi protocols, classifying certain tokens as securities, which has led to market panic. Additionally, the EU and major Asian economies are gradually promoting transaction taxes, real-name systems for wallets, and cross-border flow regulatory measures, resulting in a decline in overall trading activity and a significant slowdown in capital inflows.

Excessive leverage in the market and the bursting of bubbles

The crypto market is expanding rapidly under the narrative of AI and the new public chain boom, with many projects’ valuations far exceeding their fundamental support, leading to a significant bubble phenomenon. Many investors are using high leverage to chase prices during the upward phase, and when the correction comes, chain liquidations and stop-loss sell-offs cause prices to plummet, resulting in a massive evaporation of capital and exacerbating the overall market’s liquidity risk.

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Summary

Although the current crypto market is facing severe challenges, historical experience tells us that each burst of a bubble and market correction often represents an opportunity for resource redistribution and technological innovation. When speculative capital exits the market, projects that truly possess value and application potential can actually be born during the market winter. For long-term investors, rather than panic selling, it is better to observe the changes calmly and reassess the underlying value and future direction of the crypto industry.