BTC fell from 126,000 to a complete loss of rise, the VCs identified two main culprits.

[Block Rhythm] Bitcoin and Ethereum have given back all the gains of this year - it is worth noting that BTC just surged to a historical peak of $126,000 two months ago. This plummet came unexpectedly, but several VCs in the industry have already clarified the reasons.

First, let's talk about the brutal chain liquidation on October 11th. Dragonfly partner Rob Hadick spoke frankly: low liquidity combined with terrible risk control, plus oracles and leverage mechanisms that are as fragile as paper, led to massive losses from this deleveraging, and market confidence has been shattered. Boris Revsin from Tribe Capital calls this a “leverage purge”—the domino effect of chain liquidations spread throughout the entire market.

What's more troublesome is that the macro factors are also starting to drag behind. The expectation of interest rate cuts has fallen through, inflation stubbornly refuses to come down, employment data has slumped, geopolitical tensions are sparking everywhere, and ordinary people's wallets are getting tighter. With this set of punches, almost all risk assets have been hit hard in the past two months.

Anirudh Pai from Robot Ventures has set his sights on deeper troubles – the US economy may be hitting the brakes. The Citigroup Economic Surprise Index and the 1-year inflation swap (a derivative used to hedge against inflation) have both softened, a pattern that has played out before concerns of recessions, resulting in a widespread surge in risk aversion.

Dan Matuszewski of CMS Holdings pointed out bluntly: Apart from those tokens backed by buybacks and DAT companies, there is almost no new money entering the crypto market. The inflow from ETFs is also not effective; without incremental buyers, prices naturally plummet faster.