Bitcoin reaching new highs has led many to choose shorting on rallies. Behind this recent correction, there are actually several forces at play simultaneously.

First, let's talk about the movements on the institutional side. Spot ETF net outflows have continued for two consecutive days, totaling nearly $73 million. Leading institutions like Fidelity have started reducing their holdings; on one hand, the recent surge was too rapid and it's time to cash out; on the other hand, miners are also offloading large amounts of coins — for example, Riot Platforms sold 1,800 BTC in one go. As so much money flows out, the derivatives market shrinks accordingly, with open interest dropping by 19%. The chain reaction caused by leverage unwinding is particularly fierce, with nearly $600 million in liquidations across the entire network, and longs losing about $540 million directly. Once this negative feedback loop starts, the decline tends to be amplified. Also, note that MSCI rules restrict companies from buying crypto, further dampening institutional risk appetite.

Looking at the stock market, US stocks are diverging and weakening. The Dow fell 0.94%, and Nasdaq futures declined 0.5%, with tech stocks leading the decline. Major global indices are turning downward in unison, and Chinese A-shares and the Hang Seng Tech Index are not immune. During this time, capital begins to flow out, retreating from the highly volatile crypto markets and shifting toward relatively lower-risk assets. Rotation into risk assets and pressure on cryptocurrencies are natural outcomes.

On the macro front, there’s also some turbulence. US ADP employment data and ISM services index have shown volatility. The 10-year US Treasury yield fluctuates up and down, the dollar strengthens, and offshore RMB also faces pressure. Market expectations for the Fed’s future rate cuts are adjusting, and concerns about a high-interest-rate environment are rising, directly lowering crypto asset valuations. Platform tokens like BNB are hit especially hard because the ecosystem’s heat is already cooling down.

Therefore, shorting on rallies is indeed worth considering, but remember three key points: control your position size for each trade, set take-profit levels without greed, and never skimp on stop-loss points.