Analysis: The "1011" liquidation event and the increasingly challenging macro environment have become the main reasons for the recent downturn

ChainCatcher News, Bitcoin and Ethereum have erased all gains made so far this year—a sharp reversal for a market that just two months ago saw Bitcoin soar to a historic high of $126,000. VCs point out that there are two main reasons behind this correction: the liquidation event on October 11 and an increasingly challenging macro environment.

Rob Hadick, General Partner at Dragonfly, stated that this deleveraging event, triggered by low liquidity, poor risk management, and weak oracle or leverage mechanisms, resulted in significant losses and brought about tremendous uncertainty.

Boris Revsin, General Partner and Managing Director at Tribe Capital, shared a similar view, describing it as a “leverage washout” that caused a chain reaction throughout the market. At the same time, the macro environment has become less favorable: short-term rate cut expectations have faded, inflation remains stubborn, the job market is weakening, geopolitical risks are rising, and consumer pressure is increasing. VCs note that this series of factors has led to weak performance for most risk assets over the past two months.

Anirudh Pai, Partner at Robot Ventures, further emphasized concerns about a slowdown in the US economy. Key growth indicators—including the Citi Economic Surprise Index and 1-year inflation swaps (derivatives used to hedge inflation risk)—have already started to weaken. Pai noted that this pattern has appeared before previous recession fears, fueling broader risk aversion.

Dan Matuszewski, Co-founder of CMS Holdings, said that apart from tokens supported by buyback mechanisms, there is almost no “incremental capital inflow” into the crypto market, except for DAT (Digital Asset Treasury) companies. As new demand dries up and ETF inflows no longer provide effective support, prices are falling even faster.