Behind the $1.1 billion collapse: the outlook for Q4 under the US government's market crash and institutional hedging

According to Woofun AI, the crypto market recently experienced severe shocks. The BTC price broke through the $81,000 defense line to $80,400. Although it then rebounded above $82,000 and temporarily reported at around $82,500, ETH was not spared. After falling to around $2,400, it temporarily stabilized below $2,500. As a result of this turmoil, about 180,000 people in the entire market closed out their positions, and the total amount of liquidated positions was close to US$1.1 billion. Of these, the volume of liquidated positions by bulls reached US$935 million, and market panic spread instantaneously.

This round of sharp decline is not a source of emptiness; it is the result of multiple pressure players resonating, including the US government's asset transfers, position swapping operations by mining pool bosses, and panic selling by short-term holders, which together form the core conflict in the current market. Despite sharp short-term fluctuations, the Q4 market is still expected to maintain its upward trend from a medium- to long-term perspective. The current adjustments are more viewed as a game between price repair and stock during the bull market process.

It is worth noting that this decline revealed the fragility of the market in the context of liquidity depletion. It also revealed the differentiated coping strategies of different financial players under extreme market conditions, providing an important observation window for subsequent trends.

Judging from the liquidity structure, the market is falling into the deep waters of the stock game, and the power to add new purchases is clearly insufficient. A recent report released by Glassnode revealed a key data: the average trading volume of the exchange's BTC spot and BTC ETF in the past 7 days was about 6.8 billion US dollars. This figure is below the level of about 90% of the period since January 2024, indicating a significant decline in market trading activity. The deeper problem is the imbalance between supply and demand. In the past 30 days up to October 5, the crypto market had achieved a market capitalization of about $12.8 billion, yet the combined purchase volume of ETFs, stablecoins, and corporate reserves was only about $4.9 billion.

This means that the previous rise in the market was not driven by strong new demand, but mainly relied on market stock capital to exchange chips at higher prices. This 'price for quantity' model makes the market base unstable. Once exposed to external selling pressure, it can easily trigger a chain reaction.

According to data compiled by Woofun AI, although this internal circulation of existing capital can drive up prices in the short term, it has also accumulated a huge risk of pullback. Because of the lack of solid external capital inflow support, any turbulence may cause the bullish line of defense to collapse. Therefore, the current rise in the market is more of a fragile balance than the establishment of a strong trend, and investors need to be wary of the potential impact of liquidity depletion.

The primary source of power to break the market is the US government's asset transfer behavior, and the effects of market panic caused by it cannot be ignored. Over the past 3 days, the US government has deposited 17,733 BTC worth $1.48 billion to Coinbase Prime (COIN.US);

At the same time, 750 WBTC worth $62 million was also deposited. The BTC price dropped 6.9% during this period, showing the market's sensitive reaction to this action. Although Coinbase Prime (COIN.US) has both hosting and trading functions, the US government's transfer behavior does not necessarily mean an immediate sale, but market interpretations tend to lean towards the worst.

Woofun AI has detected that the US government currently holds about 3191,000 BTC, of which about 71% comes from Lubian-related BTC and Bitfinex recovered funds, and the assets transferred this time are also widely regarded as seized assets.

This large-scale movement of funds left the crypto market in vain, and a panic decline ensued. Investors are concerned that the government may throw these assets onto the market at any time, creating huge supply pressure. This uncertainty has increased market volatility, forced long holders to cut their positions early to avoid risks, further amplifying the magnitude of the decline. This move by the US government is not only a simple transfer of assets, but also a major test of market mentality, and its subsequent impact will continue to ferment.

Another major disruptor was the mining pool boss Wang Chun's position exchange operation. The large transaction had a direct impact on market sentiment. Yuchi Lianchuang Wang Chun's address (0xF42... 2b51) sold 235.5 WBTC worth $19.31 million on the chain after BTC fell in the early hours of the morning, in exchange for 7848.5 ETH. At the time, the price of ETH was $2,460, and the ETH/BTC exchange rate was 0.03.

This operation suggests that some industry insiders are switching from BTC to ETH, probably because they are optimistic about the relative value of ETH or are cautious about the short-term trend of BTC. Wang Chun, as a co-founder of a well-known mining pool, is trending as a weather vane, and his large selling behavior has intensified the bearish sentiment in the market. Especially in the context of BTC already falling, this position exchange operation was interpreted by the market as a safe-haven signal, further undermining the confidence of the bulls.

Furthermore, this transaction also reflects the reallocation of capital within the market among different assets, showing an adjustment in investors' risk appetite. Although the amount of Wang Chun's operation was small compared to the US government, its symbolic significance was huge, triggering other investors to follow suit and sell, thus speeding up the decline in the market.

This kind of safe-haven behavior of industry bosses often indicates that the market may face greater adjustment pressure in the short term.

Panic sell-offs from short-term holders (STH) were the third biggest driver of this round of decline, and their selling pressure hit a new high of nearly 4 months. CryptoQuant analyst Darkfost notes that Bitcoin's short-term holders are experiencing a clear sense of panic. In the past 24 hours, short-term holders transferred more than 50,000 BTC to the exchange in a single day. Of these, more than 29,500 BTC were transferred to the exchange at a loss, accounting for about 59% of the total inflow of BTC. This is the biggest loss achieved by short-term holders in nearly 4 months, showing the irrational behavior of retail investors when prices fall.

Although the BTC price stabilized at around $82,000 at the time, it then plummeted to around $80,500 during the night. It can be seen from this that short-term holders' sell-off still had a lagging impact on the market. This panic sell-off often occurs after prices have already fallen, further increasing the downward pressure on the market. Short-term holders usually lack the patience and confidence to hold for a long time. Once the price fluctuates, it is easy to panic and choose to stop and lose.

This behavior not only intensified market fluctuations, but also caused the price discovery mechanism to fail, leading to a sharp decline in the market. Therefore, short-term holders' behavior is an important indicator of market sentiment, and easing the level of panic will be a key sign of market stabilization.

Looking at medium- to long-term trends, the market is in a period of price recovery. Long-term selling pressure has weakened significantly, and signs of demand recovery are gradually showing. On October 5, Glassnode published an article stating that the trend of BTC giant whales depositing bitcoins into exchanges has stopped. The trend has continued for more than three months since summer, twice as long as other similar trends since 2023, and ended in late August. Since then, the flow of funds has continued to be negative.

This means that the BTC giant whales' journey to smash the market has come to an end, and long-term holders are still choosing to stand on the side of time. Meanwhile, CryptoQuant posted an article stating that Bitcoin miners have recently stopped large-scale sales. Since Bitcoin hit a low of $76,000 on August 21 and the miner status changed from “extremely undervalued pay” to “reasonable pay,” there have been no more extreme miner outflows. Miner sell-off pressure was an important source of supply that continued to affect the price of Bitcoin during the 2026 bear market, and the current disappearance of this stable selling pressure may help reduce supply pressure in the market.

Furthermore, spot demand for BTC has improved markedly, and the market has reached extreme risk levels. At present, the total demand for Bitcoin has returned to a positive value, exceeding 14,000 BTC, while demand for futures is relatively stable, with a recent average of about 32,000 BTC. Spot demand is currently around negative 17,000 BTC. Although it is still in a negative range, it is a significant improvement from the negative 207,000 BTC on September 20. These data show that supply pressure at the bottom of the market is easing, and the demand side is gradually recovering, laying the foundation for the Q4 rally.

Divergent views on the distribution of clearing belts and long and short divisions reveal potential risks and opportunities in the future of the market. On October 7, Glassnode reported that according to the two-month strong equalization heat map, only about 17% of the strong flat price was above the current price, and the support point near the BTC price expanded by about half within a week. The nearest large-scale flat price band is just below the BTC price, that is, between $81,700 and $83,300; the second clearing point is around $75,000; and the largest clearing band is in the $60,000-$63,000 range.

If the price of BTC falls further into these ranges, the forced liquidation of long positions may further exacerbate the general market decline. There are significant differences of opinion on the future direction of the market. On October 7, Chris Kuiper, vice president of research at Fidelity Digital Assets, believes that “the bear market is not necessarily over,” and that November is the key window, referring to the historical cycle of November 2022. TD Cowen, on the other hand, raised its forecast that BTC will reach about $109,000 by the end of 2026 and rise to $280000 in 2029.

On October 6, Darkfost indicated that the bull market score index was 80/100, but spot demand was still the missing key factor. At the beginning of October, trader Ansem was optimistic about assets such as SOL, believing that the market was in an early bull market. Trader Killa, on the other hand, focused on the $80,000 to $82,000 range and still held more than $62,600 and $76,400 BTC orders, emphasizing risk management after stopping losses of more than 10 times more than $87,000. These views reflect the market's caution and optimism in the midst of uncertainty, and investors need to develop strategies based on their own risk appetite.

Traders' specific strategies and future market operation guidelines provide investors with a practical reference framework. The giant whale “first set ten major goals” indicates that recent macroeconomic downsides have concentrated, such as rising US bond yields, strengthened interest rate hike expectations, and rising oil prices, but BTC has only pulled back by about 5%, showing market resilience. It sets stop-loss conditions: if BTC falls below $79,000, it will begin to reduce positions; if the daily closing falls below $78,000, it will close all remaining multiple orders. E-Rival, on the other hand, is inclined to see BTC fall below $79,000, believing that the pullback is not over yet, and the next support level is at $75,000. He adheres to the principle of “looking at a pullback in a bull market but not shorting”. He believes that the $86,000 pullback is a normal fluctuation, and patiently waits for the pullback to be in place before bottoming out. These strategies emphasize the importance of risk control, and also reflect the market's confidence in the long-term trend of the bull market. In the current market environment, investors should avoid blindly chasing rises and falls, but instead develop clear stop-loss and take-profit plans based on key price points.

At the same time, pay attention to the interaction between macro factors and market sentiment, and adjust positions flexibly to cope with possible fluctuations. Overall, although there are challenges in the Q4 market, the long-term upward logic has not changed. Investors should be patient and seize structural opportunities.