Over the past few days, the two largest cryptocurrencies globally experienced extreme market volatility. After hitting a new high on Sunday, Bitcoin suffered a "flash crash." At the same time, Ethereum also plummeted sharply after reaching a historic peak. What exactly happened behind this "massive shock" in the two major cryptocurrencies?

This round of intense volatility in the cryptocurrency market stemmed from a chain reaction: Federal Reserve Chair Jerome Powell's dovish stance at the Jackson Hole Economic Policy Symposium initially drove Bitcoin to surge to nearly $117,200 on Friday. After Ethereum hit a new high, it continued to climb on Sunday, reaching a historic peak of $4,954. However, a Bitcoin "whale" that had held its position for over five years suddenly sold 24,000 Bitcoins, triggering a chain reaction of panic selling.

Bitcoin fell further to around $110,500 on Monday, marking the first time since April that it broke below the 100-day moving average. Ethereum plummeted from its historic high to $4,400, and the sudden whale sell-off led to over $550 million in forced liquidations for both Bitcoin and Ethereum.

Analysts pointed out that the core of the market turmoil was a large-scale capital reallocation, with signs indicating that these funds are flowing into Ethereum. Approximately $2 billion in Bitcoin funds were reallocated to Ethereum.

Additionally, rumors suggest that during this round of market turbulence, institutional investors like BlackRock and high-frequency trading giant Jane Street are buying the dip, while ETFs such as Fidelity have recorded significant inflows. The operations of market makers like Jane Street are also believed to have exacerbated market volatility.

However, Joel Kruger, market strategist at LMAX Group, stated that despite the short-term pullback, institutional conviction remains firm.

New Highs and Flash Crashes Coexist

The past few days have been dramatic for both Bitcoin and Ethereum: On Friday, Federal Reserve Chair Jerome Powell's speech at the Jackson Hole Economic Policy Symposium opened the door to potential interest rate cuts, driving a sharp rise in cryptocurrency prices.

Bitcoin surged from around $112,000 to nearly $117,200. After a significant rise on Friday, Ethereum climbed further on Sunday, reaching a historic high of $4,954, surpassing the previous peak of approximately $4,891 in November 2021.

However, according to CoinDesk, a Bitcoin whale sold 24,000 Bitcoins on Sunday, triggering a "flash crash." This move sparked a chain reaction during the illiquid weekend trading hours.

This caused Bitcoin's price to drop over 2% within 10 minutes, hitting a low of $110,500. By Monday afternoon, Bitcoin had further retreated to around $110,500, narrowing its year-to-date gain to approximately 18%.

Jacob King of WhaleWire pointed out that the whale's actions triggered panic selling among other traders, exacerbating the downward spiral. This liquidity crunch worsened against the backdrop of increased leveraged long positions in the previous week.

Compared to Bitcoin, although Ethereum also pulled back to $4,400, its year-to-date gain remains over 31%, showing relatively stronger performance than Bitcoin.

A Strategic Shift of $2.7 Billion

The core of this market turmoil is a large-scale capital reallocation. On-chain analysis shows that the whale account that sold 24,000 Bitcoins still holds 152,874 Bitcoins, worth over $17 billion. This investor has held these Bitcoins for more than five years.

More critically, the flow of funds. Data indicates that after the Bitcoin sell-off, a significant portion of the funds was reinvested into Ethereum. Two entities reallocated $2 billion in Bitcoin funds to Ethereum, with 275,500 Ethereum (worth $1.3 billion) already staked.

Analysts believe this capital reallocation reflects a broader shift in market sentiment, with investors increasingly bullish on Ethereum's growing utility in stablecoins, tokenization, and smart contracts.

Jeff Mei of BTSE and Samir Kerbage of Hashdex noted that compared to Bitcoin, Ethereum's smaller market capitalization may react more noticeably to potential Fed rate cuts and increased system liquidity.

According to CoinGlass data, over the past 24 hours, $273 million in Bitcoin positions were forcibly liquidated, while $296 million in Ethereum positions were liquidated. The total cryptocurrency liquidation amount reached $838 million.

Wall Street "Buying the Dip"

Amid the intense market volatility, rumors suggest that Wall Street institutions are taking advantage of the opportunity to buy the dip. Financial blog zerohedge posted on social platform X that institutions like Fidelity, Bitwise, and 21Shares have seen significant inflows, and the market is closely watching the moves of large asset management companies like BlackRock.

According to rumors, Fidelity has achieved a net inflow of $87 million, Bitwise saw an inflow of $9.7 million, and 21Shares recorded an inflow of $5.6 million. The market is still awaiting the latest developments from BlackRock. Although these figures have not been officially confirmed, they reflect that institutional investors may be using the market pullback to accumulate cryptocurrency assets.

Another rumor drawing attention involves the operations of market maker Jane Street. There are claims that the company's "momentum deception" operations caused Ethereum to fall into correction less than 24 hours after hitting its historic high, described as one of the "most brutal" operations in history.

However, overall ETF fund flows showed divergence. According to Farside Investors data, spot Bitcoin ETFs had recorded net outflows for six consecutive trading days as of last Friday, totaling $1.19 billion.

Spot Ethereum ETFs had previously seen net outflows for four consecutive days, totaling $925.7 million, but recorded net inflows of $625.3 million on Thursday and Friday.

Despite the short-term volatility, analysts remain cautiously optimistic about the medium- to long-term outlook. Alex Krüger of Aike Capital pointed out that once short-term volatility subsides and prices break through the key resistance level of $113,500–$114,000, Bitcoin could regain upward momentum.

Options data also show sustained bullish sentiment. Sean Dawson of on-chain options platform Derive stated that the market has not been shaken by the pullback, and the fundamentals remain intact. The current 7-day Relative Strength Index (RSI) indicates an oversold condition, but there are no clear reversal signals yet.