#ETH funding "reflow" and liquidity "stalled": the dual logic of the big dump of virtual currency

Recently, the virtual currency market has experienced a new round of intense fluctuations, with mainstream cryptocurrencies such as Bitcoin and Ethereum significantly dropping in price in a short period of time, leading many investors to exclaim "the bear market is back." This big dump was not triggered by a single factor, but rather the result of a combination of macro policy shifts, adjustments in capital flows, and the market's own shrinking liquidity, among which the "homecoming effect" of capital due to the easing of China-U.S. trade frictions is particularly crucial.
The phased easing of China-U.S. trade frictions has become a core variable for driving the flow of funds. With both parties signing a one-year trade easing agreement, the focus of economic policies in both countries has clearly shifted towards "deepening the domestic market." For the U.S., after ending the trade friction, the Federal Reserve's cessation of quantitative tightening will more favorably tilt towards the recovery of domestic manufacturing and boosting the stock market; China, on the other hand, focuses on consumption stimulation and upgrading the real economy, with a series of stable growth policies continuously releasing market potential. In this macroeconomic context, the large funds that had previously flowed into the virtual currency market due to risk aversion or profit-seeking impulses are beginning to reassess their asset allocation logic—compared to the highly volatile cryptocurrencies, traditional mainstream assets like stocks and bonds, which have a clear recovery momentum, obviously better meet the demand for "safety cushion + stable returns" for funds, directly triggering a wave of capital withdrawal from the virtual currency market.

The "reflow" of funds is not merely a simple withdrawal, but rather exhibits characteristics of structured adjustment. Some risk-averse funds, in search of a smooth transition, have not completely exited the field of risk assets, but instead choose to gradually enter the spot market for ambush. This operation of "retreating but not withdrawing" essentially means that funds are waiting for the market valuation to return to rationality while avoiding the current liquidity risks in the cryptocurrency market. However, in the short term, the large-scale transfer of mainstream funds is sufficient to trigger market panic, and coupled with the chain reaction of forced liquidation of leveraged funds, further exacerbates the price fall.

It is worth noting that the adjustment of capital flow between China and the United States coincides with the liquidity "stall period" of the virtual currency market itself. According to market data, the three core channels currently supporting the inflow of cryptocurrency funds—stablecoins, digital asset ETFs, and digital asset trusts (DAT)—are showing clear signs of growth stagnation. Since the second half of 2025, the inflow momentum of digital asset ETFs and DAT has significantly slowed, and the issuance scale of stablecoins has also ended its previous doubling growth trend, indicating that the channels for new capital to enter the crypto ecosystem have clearly narrowed. More critically, the higher secured overnight financing rate (SOFR) has increased the attractiveness of cash and government bonds, locking a large amount of liquidity in low-risk areas, and the "incremental funds" that might have flowed into virtual currencies are being diverted, causing the market to fall into a state of "internal capital circulation". Once capital withdrawal occurs, it can easily trigger drastic price fluctuations.

In addition, subtle changes in the regulatory landscape have added uncertainty to the market. The recent passage of the "Anti-CBDC Surveillance National Act" by the U.S. House of Representatives clearly supports the development of private stablecoins, but it also highlights the further clarification of the cryptocurrency regulatory framework. Some institutional funds have chosen to reduce their positions in advance to avoid potential future regulatory risks. This "policy pre-cautious retreat" resonates with the macro fund transfers, together forming a complete logical chain for this big dump.

Overall, the recent big dump in virtual currencies is an inevitable result of the shift in macroeconomic focus combined with the market's own cyclical factors. The "returning" of funds due to the easing of US-China trade tensions is a direct trigger, while the endogenous shrinkage of liquidity in the cryptocurrency market is the deeper root cause. For investors, the current market is in a "funds rebalancing" phase, and attention should be focused on two key signals: first, whether funds will flow back into risk assets if the US-China domestic economic recovery is below expectations; second, whether there will be signs of recovery in the liquidity channels for virtual currencies (such as ETFs and stablecoins). These two factors will determine whether the market can emerge from the current adjustment cycle. New gains may come in the second half of next year, after the agreement ends. #比特币行情观察