Over the past week, the cryptocurrency market experienced a significant correction after its rapid initial surge. BTC fell from a high of approximately $126,000 to as low as $104,800, a drop of over 14%, while ETH also weakened. Short-term liquidity constraints and heightened macroeconomic risk aversion were the main triggering factors, but based on on-chain data and capital structure, this correction appears more like a phase of consolidation than a trend reversal.

Macroeconomic disturbances and cooling risk appetite

In late October, the US announced a 100% tariff on Chinese goods, triggering a rise in global risk aversion. Simultaneously, US Treasury yields rose, leading to a short-term withdrawal of funds from high-risk assets and suppressing the upward momentum of digital assets. The crypto market's sensitivity to liquidity changes became prominent again. Net inflows into stablecoins slowed since mid-October, indicating that institutional funds were on the sidelines, while retail trading activity cooled with price fluctuations.

On-chain fund flows indicate a "structural adjustment".

On-chain metrics show that long-term holders (LTH) did not significantly reduce their holdings after the price fell below $110,000; instead, they showed slight signs of increasing their positions. Meanwhile, short-term traders (STH) concentrated their selling above $115,000, indicating that the market is still in a healthy turnover process. The Matrixport research team points out that this fund flow characteristic means the market is undergoing a transition from short-term speculation to medium-term holding, and the fluctuation range may remain between $105,000 and $120,000.

Institutional holdings remain stable, and ETF funds continue to provide support.

Despite a significant overall market correction, there has been no substantial redemption in US-listed BTC spot ETFs. Statistics show that net outflows from major ETFs have been limited, indicating that institutional investors remain interested in long-term allocation. Furthermore, open interest in CME BTC futures remains high, suggesting that market participation has not significantly declined. Some institutions are beginning to utilize the volatility range to deploy structured products to enhance return flexibility.

ETH performance was mixed, with continued inflows of ecosystem funds.

ETH prices are under short-term pressure, but on-chain activity and ecosystem fund flows remain relatively stable. Total Value Locked (TVL) in DeFi has rebounded slightly amid fluctuations, and ETH staking ratios remain high, indicating that long-term investor confidence has not been undermined. Driven by Layer 2 and restaking initiatives, ETH's ecosystem narrative remains clear, potentially providing structural support for subsequent market recovery.

Strategy Recommendation: Profit Management During Range-Bound Trading

In the short term, the market may continue to be influenced by macroeconomic and liquidity factors, and increased volatility is inevitable. Matrixport advises investors to maintain flexible asset allocation and lock in returns through structured products (such as dual-currency wealth management products and cumulative options AQ) to balance risk and return in a volatile market. For medium- to long-term investors, this correction provides an opportunity to increase positions, especially after macroeconomic policies become clearer and funding costs peak, the digital asset market is expected to usher in a new round of recovery.

This market correction appears more like a natural adjustment to previously overheated sentiment than a trend reversal. The stability of on-chain funds and institutional positions indicates that the market fundamentals remain intact. Investors can use this period of volatility to optimize asset allocation and focus on structured income products to secure certain returns amidst uncertainty.

The above content is from Daniel Yu, Head of Asset Management, and represents only the author's personal views.

Disclaimer: Investing in the market involves risks; please exercise caution. This article does not constitute investment advice. Digital asset trading can be extremely risky and volatile. Investment decisions should be made after careful consideration of your individual circumstances and consultation with a financial professional. Matrixport is not responsible for any investment decisions made based on the information provided in this content.