Over the past 48 hours, the world's two largest cryptocurrencies have experienced extreme market volatility. Bitcoin suffered a "flash crash" after reaching new highs on Sunday, while Ethereum similarly plummeted after hitting historic peaks. What exactly happened behind this dramatic market turbulence?

The severe volatility in the cryptocurrency market stemmed from a series of chain reactions. Fed Chair Powell's dovish stance at the Jackson Hole Economic Policy Symposium initially drove Bitcoin to surge to nearly $117,200 on Friday. Ethereum continued climbing on Sunday after setting new highs, reaching a historic peak of $4,954. However, a Bitcoin whale who had held coins for over five years suddenly sold 24,000 Bitcoin, triggering a cascading selloff.

Bitcoin further declined to around $110,500 on Monday, falling below its 100-day moving average for the first time since April. Ethereum crashed from its historic high to $4,400, with the whale's sudden selling causing over $550 million in forced liquidations across Bitcoin and Ethereum.

Analysts point out that the core of the market turbulence was a massive capital reallocation, with signs indicating funds are flowing toward Ethereum. Approximately $2 billion in Bitcoin funds were reallocated to Ethereum.

Additionally, rumors suggest that during this market volatility, institutional investors BlackRock and high-frequency trading giant Jane Street are buying the dip, while ETFs like Fidelity have recorded significant inflows. Operations by market makers like Jane Street are also believed to have amplified market volatility.

However, LMAX Group market strategist Joel Kruger notes that despite short-term corrections, institutional conviction remains firm.

**Weekend "Tale of Two Cities": New Highs and Flash Crashes Coexist**

Bitcoin and Ethereum demonstrated starkly different market performances over the past 48 hours. On Friday, Fed Chair Powell's speech at the Jackson Hole Economic Policy Symposium opened the door for potential rate cuts, driving significant gains in cryptocurrency prices.

Bitcoin surged from approximately $112,000 to nearly $117,200, while Ethereum, after Friday's rally, continued climbing on Sunday to touch a historic high of $4,954, surpassing the previous peak of around $4,891 from November 2021.

LMAX Group market strategist Joel Kruger stated: "Powell's rate cut hints initially boosted market sentiment, but subtle differences in his wording and a less dovish tone than expected unsettled the market."

Beyond this, the reversal in cryptocurrency gains also stemmed from whale selling. A Bitcoin whale's sale of 24,000 Bitcoin on Sunday triggered a "flash crash," causing chain reactions during the weekend's thin liquidity period.

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

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

Compared to Bitcoin, while Ethereum similarly corrected to $4,400, its year-to-date gains still exceed 31%, showing relatively stronger performance than Bitcoin.

**Whale "Switching": $2.7 Billion Strategic Transfer**

The core of this market turbulence was a massive capital reallocation. On-chain analysis shows that the whale account that sold 24,000 Bitcoin still holds 152,874 Bitcoin, worth over $17 billion, having held these coins for more than five years.

More crucially was the capital flow direction. Data shows that after the Bitcoin selling, a considerable portion of funds were reinvested into Ethereum. Two entities reallocated $2 billion worth of Bitcoin funds to Ethereum, with 275,500 Ethereum (worth $1.3 billion) already staked.

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

BTSE's Jeff Mei and Hashdex's Samir Kerbage note that compared to Bitcoin, Ethereum's smaller market cap might react more significantly to potential Fed rate cuts and increased systemic liquidity.

According to CoinGlass data, Bitcoin positions faced $273 million in forced liquidations over the past 24 hours, Ethereum positions $296 million, with total cryptocurrency liquidations reaching $838 million.

**Wall Street "Bottom Fishing" Rumors: Institutional Capital Counter-Positioning**

Amid the severe market volatility, rumors suggest Wall Street institutions are taking advantage to bottom fish. Financial sources indicate that Fidelity, Bitwise, 21Shares and other institutions have seen significant capital inflows, with markets closely watching moves from major asset managers like BlackRock.

Rumors suggest Fidelity achieved $87 million in net inflows, Bitwise $9.7 million inflows, and 21Shares $5.6 million inflows, with markets still awaiting BlackRock's latest moves. While these figures haven't been officially confirmed, they reflect that institutional investors may be using market corrections to increase their cryptocurrency holdings.

Another rumor drawing attention involves market maker Jane Street's operations. Sources claim the company's "momentum spoofing" operations caused Ethereum to enter correction within 24 hours of hitting historic highs, described as one of the "most brutal" operations in history.

However, overall ETF capital flows show divergence. According to Farside Investors data, spot Bitcoin ETFs recorded net outflows for six consecutive trading days through last Friday, totaling $1.19 billion.

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

Despite severe short-term volatility, analysts maintain cautious optimism about medium to long-term prospects. LMAX's Kruger states: "As long as Bitcoin maintains above $110,000 on a weekly closing basis, the market is expected to show good resilience during declines."

Aike Capital's Alex Krüger points out that once short-term volatility subsides and prices break through key resistance levels of $113,500-$114,000, Bitcoin could regain upward momentum.

Options data also shows continued bullish sentiment. Sean Dawson from on-chain options platform Derive indicates that markets haven't been shaken by the correction, with fundamentals remaining intact. The current 7-day Relative Strength Index (RSI) shows oversold conditions, but no clear reversal signals yet.