The rebound fails to conceal the declining trend. Bitcoin records the largest monthly drop since the Terra collapse. "Extreme panic" suggests that the downturn is not over yet?

On Sunday, cryptocurrency rebounded, with Bitcoin breaking through $86,000 per coin, up 1.63% within the day; Ethereum also reached $2,800 per coin, up 1.11% within the day. However, this rebound cannot hide the brutal downturn of this month - Bitcoin is experiencing its worst month since the Terra collapse in 2022. Last Friday, Bitcoin fell to a low near $80,500, evaporating about $500 billion in market value. This is the first time the cryptocurrency market has faced such a stress test since exchange-traded funds (ETFs) brought Wall Street and retail investors into the market. Investors have withdrawn billions of dollars from 12 Bitcoin-related ETFs, and data from Bloomberg shows that digital asset "treasury companies" - those listed companies that hold tokens - have experienced even larger outflows, prompting the market to question the value of these corporate structures. Since President Trump's election victory in November last year, Bitcoin has still risen by about 50%, but most of the gains in his first year in office, which he called the "golden age" of cryptocurrency, have now vanished. This downturn has revealed a more fragile ecosystem for cryptocurrencies deeply integrated into Wall Street and the public market. Roots of the October Crash The explicit trigger for this downturn was the flash crash on October 10. On that day, $19 billion in cryptocurrency bets were liquidated within hours, knocking Bitcoin down from the all-time high of $126,251 it had set just a few days earlier. Cantor Fitzgerald analysts Brett Knoblauch and Gareth Gacetta wrote in a report on Thursday, "We believe that the majority of the cryptocurrency market's downturn originated from the events on October 10. It felt like some large participants were forced to sell off as the impact of the 10/10 event on the balance sheet may have far exceeded initial expectations." This flash crash exposed long-term liquidity issues in weekend trading hours and the overleveraging of some exchanges. Coinglass data shows that last Friday, about $1.6 billion in bets were liquidated as leveraged traders were hit by the latest round of downturns. The liquidity problem has yet to be resolved, weakened market makers cannot intervene to support prices, and liquidity in the cryptocurrency market remains low. Wall Street Exodus, Cryptocurrency Treasury Models Tested Unlike previous crises, ETFs played a new role in this crisis. These funds did not exist in the previous cryptocurrency market meltdown. According to Bloomberg data, investors have withdrawn billions of dollars from 12 Bitcoin-related funds this month, with previous buyers including the Harvard University endowment fund and several hedge funds. Fadi Aboualfa, research supervisor at Copper Technologies, said, "What happened over the past two months was like rocket fuel, as if people were expecting a crash. That's how institutional investors operate. They don't hold on, they don't have that mentality. They rebalance their portfolios." The wave of digital asset "treasury companies" has faced more significant outflows, and these listed companies shells set up solely to hold tokens are facing questions about their value. Many "treasury companies" are built on the belief that listed companies holding only cryptocurrencies can have a higher value than the tokens they hold. This model mirrors the overleveraged lending institutions in 2022. If confidence collapses, forced selling may follow, and many companies' token holdings are underwater. Adam Morgan McCarthy, senior research analyst at blockchain data company Kaiko, said, "When you see a medical device company or a cancer research company transform into a cryptocurrency treasury company, it marks where you are in the cycle." Emotions Plummet to Extreme Panic, Risks Continue to Accumulate Any remaining positive sentiment in the industry seems to be rapidly plummeting. According to CoinMarketCap data, the fear and greed index score for the cryptocurrency market sentiment was 11 out of 100 last Friday, deep in the "extreme panic" area. Chris Newhouse, research director at Ergonia, a company focusing on decentralized finance, said, "There has been a rapid increase in panic sentiment towards relatively high levels, and a clear lack of structural demand for spot, prompting the market to lose the natural buyers that typically appear during significant pullbacks." It is worth noting that the magnitude of the current Bitcoin price correction is still far less than the 75% drop during the bear market of 2021-2022, implying that the pain may run even deeper. Each downturn at that time exposed another major participant's problem - from Celsius to BlockFi to Three Arrows. Although there are no obvious bankruptcies or scandals this time, some traders believe the current downturn is more about technicals and confidence rather than systemic cracks. Luke Youngblood, founder of the lending platform Moonwell, said, "We haven't taken the same downward path; overall macro conditions, government support, and the reduction of bad actors in the industry make today's market more resilient. Even with concerns in the future, the foundation of cryptocurrency has become more solid." This article is reprinted from "Wall Street See" and is authored by Zhao Ying; GMTEight edited by Xu Wenqiang.