The Truth Behind BTC's Big Dump: Arbitrage Trading Reversal and the "Davis Double-Click" of Expected Overdraft

As the Asian market opened, it immediately fell, with Bitcoin teetering before the technical support level of $91,200. This decline is by no means a mere emotional outburst, but rather a structural adjustment triggered by a turning point in macro liquidity. Although the user's mention of "Powell's resignation" is completely false news, the two major factors of the Bank of Japan's interest rate hike expectations and the Federal Reserve's policy expectations are forming a rare "Davis Double Play" effect in the crypto market.

1. Direct Trigger: The "Closing Tsunami" of Yen Arbitrage Trading

The Bank of Japan's hawkish shift is the real trigger for this round of falls.

Currently, the market bets that the probability of a 25 basis point rate hike in December has reached 48%, while the yield on the 10-year Japanese government bond has soared to 1.80% (approaching historical highs), directly breaching the cost bottom line for arbitrage trades. Over the past few years, global investors have borrowed yen at an ultra-low interest rate of 0.1% and invested in dollar assets yielding 5% (including U.S. Treasuries, U.S. stocks, and crypto assets). Once Japan raises interest rates, the game rules of "shorting yen and going long on risk assets" will be completely rewritten.

Arbitrage trade closing path:

1. Rising financing costs: A 25 basis point rate increase will raise the financing cost in yen by 0.25%. While this may seem minor, for hedge funds with leverage ratios of 10 to 20 times, the marginal profit is compressed by over 50%.

2. Forced deleveraging: When the yield on Japanese government bonds rises, the value of collateral decreases, triggering margin calls, and institutions are forced to sell risk assets to cover yen shorts.

3. Liquidity Resonance: During the Asian morning session in Tokyo time, the Coinbase premium index briefly turned negative, indicating a panic withdrawal of Asian funds.

Real data: In November, Bitcoin ETFs experienced a cumulative outflow of approximately $1.8 billion, a significant portion of which is directly related to the closure of yen arbitrage trades. When arbitrage funds withdraw, the market loses not only the volume of funds but also depth and resilience—Coinbase's order book shows that buy order depth above $92,000 has decreased by 60% compared to early November.

2. Core Reason: The "Death Spiral" of Short-Term Holders

According to CryptoQuant's on-chain analysis, the core driver of BTC's fall from $126,000 to $95,000 (within 6 weeks) is the panic selling from short-term holders (STH), rather than the exit of long-term investors.

Key evidence:

• STH loss selling: On November 14, addresses holding for less than 3 months panic-sold 148,241 BTC in a single day when the price fell below the psychological threshold of 100,000 USD, with an average selling price of 96,853 USD, far below their cost basis of 102,000-107,000 USD.

• Leverage liquidation wave: On November 18, when BTC fell below 90000 USD, the total liquidation across the network reached 1.2 billion USD in 24 hours, of which 90% were long leverage positions, leading to a "fall - liquidation - further fall" death spiral.

• Long-term holders remain inactive: Although LTH has taken profits, it is a normal mid-cycle adjustment and there has been no panic distribution at the top of the bull market.

This explains why users observed that "the structure of BTC chips is stable, with no panic selling"—because the real panic selling comes from leveraged retail investors who entered the market between March and June, rather than long-term investors who have held their coins for over a year. After the price fell below $89,000, the selling pressure from STH was basically cleared, and the market entered the bottoming phase of "weak hands transferring to strong hands."

III. Expected Overdraft: The "trap" of an 87.4% probability of interest rate cut

CME FedWatch shows that the probability of a 25BP rate cut in December is as high as 87.4%, but this is not a positive sign; rather, it is the biggest source of risk.

Three major evidences of expected overdraft:

1. Price leads: BTC rebounded from $81,000 to $91,000 in early November due to expectations of interest rate cuts, an increase of 12%. The current price has fully priced in the interest rate cut, and even partially priced in another rate cut in January.

2. ETF capital divergence: On November 28, there was a net inflow of $71.37 million into ETFs, but BlackRock's IBIT saw an outflow of $114 million, indicating that long-term allocation funds are retreating on the rebound, with only short-term trading funds chasing high prices.

3. PCE Data Blind Spot: October CPI and PCE data are permanently missing due to the government shutdown, and the Federal Reserve will make decisions in a "data vacuum." This uncertainty should have suppressed risk appetite, but the market chooses to ignore it and instead bets wildly on dovish policies.

Historical Mirror: In December 2024, the probability of interest rate cuts reached 98.6%, but after the rate cut was implemented, Bitcoin fell 6% within 48 hours. Institutions often use "buy the expectation, sell the fact" to harvest retail investors, and as the probability of 87.4% approaches 100%, the risk of a pullback after implementation increases.

4. Fake news disturbance: The contradictory rumors of Powell's resignation.

The user's judgment is completely correct - Powell's resignation is fake news.

Fact-checking:

• Source Credibility: The rumor originates from Twitter KOL, with no reports from Reuters, Bloomberg, or the Federal Reserve's official website.

• Impossibility of the procedure: The resignation of the Federal Reserve Chairman requires re-nomination, review, and voting by the Senate, a process that takes at least 2-3 weeks, making it impossible to "suddenly" take effect on December 1.

• Suspicious motive: The timing of the rumor release is precisely before the US December interest rate meeting, intending to create chaos to pressure the Federal Reserve into a dovish decision.

The reality is: Trump is indeed selecting a successor for Powell, whose term ends in May 2026. The final shortlist has been announced, with Hassett (a radical rate cutter) and Waller (a moderate) being the most favored. However, this is a normal personnel change and is completely different from a "sudden resignation."

The market impact of such rumors lies in exacerbating volatility—fear-driven selling in the early session pushed BTC down to $89,000, but after mainstream media debunked the rumors, the price quickly rebounded to $90,500. Rumors have become a tool for algorithmic trading to harvest volatility, with retail investors becoming the biggest victims due to information asymmetry.

Five, macro linkage: AI bubble anxiety and the drag of US tech stocks

The recent decline in the crypto market is not an isolated event, but part of a global resonance of risk assets.

Capital flow chain:

• Concerns over overheating in AI investment: AI infrastructure investment is expected to exceed $400 billion by 2025, accounting for 34% of total private investment in the U.S. Wall Street is beginning to worry about an "AI bubble," with hedge funds significantly reducing their holdings in Nvidia in the third quarter, Bridgewater cutting its position by nearly two-thirds, and Coatue Management reducing its holdings by 1.6 million shares.

• Technology stocks → Cryptocurrency asset transmission: TradFi managers are reducing their holdings in Nvidia while simultaneously cutting their Bitcoin exposure, as both belong to the "high growth high risk" positions in their portfolios.

• Liquidity squeeze effect: When funds withdraw from tech stocks, cryptocurrencies, as "marginal assets of the tech sector," are the first to be impacted.

Key point: On November 25, a survey by a US bank showed that investors were net overweighting European stocks and underweighting US stocks, leading to capital outflows from US stocks, which in turn dragged down Bitcoin, which is highly correlated with US stocks.

6. Technical Breakdown: The Chain Reaction of Losing the 50-Week Moving Average

BTC falls below the 50-week moving average (approximately $93,000), which is a technical signal of the end of a two-year bull market trend.

Technical chain reaction:

• Quantitative strategy triggered: The 50-week moving average is a key threshold for trend-following strategies. Once it falls below this level, it automatically triggers billions of dollars in long liquidations.

• Psychological support collapses: After the psychological barrier of 100,000 dollars is breached, it changes from "support level" to "resistance level", with a rebound to this position encountering intense selling pressure.

• Next target: Analysts point out that BTC may drop to the 200-week moving average (around $68,000) to complete the mid-term bottoming process.

Current awkwardness: The $89,000-$90,000 range serves as short-term support, but the chip structure is loose. If it falls below $88,500, it will trigger a new round of long liquidations at the $300 million level, and the price may drop to $86,000.

7. Subsequent Key Milestones: The Real Impact of the December Macroeconomic Calendar

The macro calendar listed by the user is basically accurate, but a risk level assessment needs to be added:

Event Time Key Market Expectation Actual Risk

The US stops quantitative tightening December 1 ★★★★★ Liquidity shifts The positives have been priced in; if the reverse repurchase scale does not fall below 500 billion after the balance sheet reduction stops, the market may be disappointed.

Powell's Speech December 2 ★★★★☆ Dovish reassurance The hawkish risk is greater; if it suggests a pause in rate cuts in January, BTC may drop sharply by 3%-5%.

ADP Employment Data December 3 ★★★☆☆ The worse the data, the better If employment is strong (>150,000), interest rate cut expectations will cool, bearish.

Challenger Layoff Report December 4 ★★★☆☆ The more layoffs, the better Limited impact due to data lag.

PCE inflation data December 5 ★★★★★ Better than expected, positive Core risk, if core PCE exceeds 2.7%, it will crush the interest rate cut narrative.

Federal Reserve interest rate decision December 19 ★★★★★ Cut by 25BP Immediate bearish impact, beware of "buy the expectation, sell the fact" replay.

Maximum risk: The permanent absence of U.S. October inflation data leads to decision-making by the Federal Reserve in an information vacuum. If December employment data (supplementary release) shows inflationary pressure, the market will reprice the interest rate hike risk for 2026.

8. Investment Strategy: Survive the volatility, rather than predict the direction.

The current best strategy is "dynamic hedging" rather than "directional betting":

1. Position Management:

• The cash ratio should not be less than 50%, to avoid being fully invested during peaks of volatility.

• If the position exceeds 70%, actively reduce the position to 50% above 91500 US dollars.

2. Options Insurance:

• Buy put options with a strike price of $85,000 expiring on December 27, with a premium of approximately $800 each.

• Sell call options with a strike price of 95000 USD expiring on December 27, with a premium of about 600 USD per option.

• Net cost of 200 USD, building the "Seagull Strategy", locking in the 85000-95000 USD range

3. Cross-Asset Hedging:

• If you hold BTC, you can short the Nikkei index futures (the arbitrage between Nikkei and yen is positively correlated)

• Alternatively, buy USD/JPY put options to hedge against the risk of yen appreciation.

4. Do not participate in altcoins: Although XRP, SOL, and others may rise due to capital overflow, they can fall without a bottom when liquidity dries up. Avoid in December.

Core conclusion: The fall is healthy, but the bottom has not yet been solidified.

The essence of the recent big dump of BTC is a "macroeconomic liquidity turning point + leverage clearing + expectation overdraft" trio, rather than a trend reversal. Short-term holders have basically cleared out, and the market has entered the "weak hands → strong hands" transfer phase.

But building a bottom takes time:

• Technical aspect: Need to hold above 88500 USD and regain 93000 USD to confirm trend recovery.

• Macroeconomic level: We need to wait for the dot plot guidance after the interest rate cut on December 19 and the data verification in January 2026.

• On the funding side: need to observe whether the ETF can achieve a continuous net inflow of over 1 billion USD for 10 consecutive days (currently only 3 days).

The survival rule for retail investors: Before the December interest rate meeting, cash is king, and volatility is food. Use options tools to earn time value instead of betting direction with spot. A true bull market never needs an 87.4% probability to confirm—it starts quietly when everyone is in despair. #成长值抽奖赢iPhone17和周边 #十二月行情展望 #百倍币种分享 $BTC $ETH