Tencent's "Deep Dive": The Lesson of $700 Million – The "Old Narrative" of the Crypto Market is Dead

Tencent Finance's "Deep Dive"

By Xie Zhaoqing

Edited by Liu Peng

The cryptocurrency market gave back all the gains brought by Trump's inauguration, experiencing an epic crash that brought back the word "risk," which had been temporarily forgotten by greed, to stare at all investors in its most menacing form.

Bitcoin experienced its biggest weekly drop in three years over the past week. February 5th was an unexpected day for crypto market investors: Bitcoin fell by 13%, marking its biggest single-day drop since June 2022, and briefly dipped below $61,000 in the early hours of February 6th.

In this sharp correction, Yi Lihua, a veteran in the cryptocurrency circle, "cut his losses" by selling 400,000 Ethereum within a week, resulting in a loss of $700 million. He became the number one "whale" ruthlessly hunted down in this round of crash.

This sharp correction caught the market off guard, including long-term bullish "holdouts." Worse still, many bullish investors remain unclear about the exact cause of the crash.

Several cryptocurrency market investors in Hong Kong or Singapore told Tencent News's "Deep Dive" that while they could not pinpoint a single cause for the crash, they unanimously believed that the immediate trigger was the flash crash in silver and gold prices, which in turn accelerated the decline in cryptocurrencies such as Bitcoin.

On January 30, following the news that Kevin Warsh, a prominent American "hawk," had been nominated as the chairman of the Federal Reserve, the market anticipated that the Fed would maintain high interest rates to curb inflation, causing the dollar to strengthen and silver to plummet by more than 30% that day. Subsequently, global risk assets came under pressure and declined.

An entrepreneur in the Hong Kong-based crypto industry analyzed for Tencent News's "Deep Dive" that, influenced by Bitcoin's halving mechanism every four years, the "four-year cycle" theory of the crypto market remains valid. However, with the addition of external macroeconomic factors, market volatility has significantly increased. The halving of Bitcoin mining rewards every four years remains the core logic of the "four-year cycle."

"This round of cryptocurrency market rally is mainly driven by 'narratives': expectations of pro-cryptocurrency policies after Trump takes office, expectations of the Federal Reserve's policy path, and MicroStrategy's (MSTR) corporate treasury model are all seen as positive factors."

However, many industry insiders, including the aforementioned entrepreneurs, believe that most of these expectations remain at the narrative level and lack substantial business innovation.

Believers in the crypto market firmly believe that once a narrative is accepted by the market, traditional funds will continue to flow in, thereby driving further increases in Bitcoin demand and price. However, these narratives have now clearly "frustrated" and lost their real-world support. Unlike these staunch believers in the crypto market, traditional funds or institutions typically place crypto assets at the bottom of their asset allocation lists. Once market volatility intensifies, crypto assets are the first to be sold off.

Yi Lihua's $700 million loss is not only a Waterloo for a top player, but also a declaration that the "old narrative" upon which the crypto market relies for survival has become invalid. For a long time, the market has been intoxicated by the cyclical iron law of "halving every four years," the illusion of funds brought by ETF compliance, and the policy dividends of Trump and the leverage games of MicroStrategy-style treasury operations. However, this bull market is different from the past; it lacks substantial innovation as its framework, relying solely on macroeconomic expectations and emotional narratives to build castles in the air. When the Fed's hawkish signals punctured the bubble, the era of maintaining high valuations simply through storytelling came to an abrupt end. This signifies that the crypto market is undergoing a brutal disenchantment: "faith" without underlying application innovation proves vulnerable when liquidity recedes, the old wealth-creation logic has collapsed, and the market is forced to search for true value anchors in the midst of a harsh winter.

The Collapse of Faith: A Bitter Lesson of $700 Million

The list of crypto market "evangelists" who suffered heavy losses in this Bitcoin crash includes, but is not limited to, Michael Saylor, Tom Lee, and veteran crypto investor Yi Lihua.

Michael Saylor's publicly traded company, MicroStrategy, currently holds 713,502 Bitcoins, making it the publicly traded company with the largest Bitcoin holdings globally. Tom Lee, known as the "Prediction King" of Wall Street, is the current chairman of the board of Bitmine, the publicly traded company with the largest Ethereum holdings. Both are long-term, staunch holders of Bitcoin and Ethereum.

Public data shows that the listed companies held by Michael Saylor and Tom Lee have suffered significant book losses: MicroStrategy lost approximately $12.4 billion, while Bitmine lost approximately $6 billion.

Yi Lihua may be the whale that was "targeted" the fastest in this wave of market crash. As a publicly bullish market participant, the six account addresses of Yi Lihua's funds were completely transparent throughout the process.

Since February 1, due to leverage pressure, Yi Lihua and his team have been forced to continuously sell Ethereum, and the entire network has witnessed almost in real time their process of falling into a "death spiral".

Yi Lihua may have considered continuing the gamble at one point. In the first four days of February, he sold only about 190,000 Ethereum, and paused selling on February 5, when he still held 460,000 Ethereum.

On February 4th, Yi Lihua still expressed optimism about this bull market on social media, stating that "now is the best time to buy spot." Public data shows that, in order to deleverage, his average selling price dropped from over $2,000 to $1,500.

Yi Lihua is an early participant in the cryptocurrency market and successfully exited the market before the "10/11 attacks" in 2025, reportedly cashing out over $300 million. In the 24 hours leading up to October 11, 2025, the price of Bitcoin plummeted from a high of $120,000, with the total amount of liquidations across the network roughly estimated to exceed $19 billion.

Just three days later, Yi Lihua stopped sticking to his views and began to accelerate the sale of Ethereum held by his fund, Trend Research.

According to Arkham data, on February 6, Yi Lihua may have decided to give up and sold off the remaining 440,000 Ethereum in one go, including nearly 60,000 Ethereum between 9 pm and midnight that night.

Yi Lihua may have already made the clearance sale plan as early as the daytime of February 6th. Tencent News's "Deep Dive" learned that Yi Lihua appeared near Causeway Bay in Hong Kong on the afternoon of February 6th and stayed until around 10 PM before leaving. Yi Lihua did not exhibit any unusual behavior at the scene. However, at the same time, his team was carrying out an accelerated clearance sale.

As of February 7, the fund managed by Yilihua held only 20,000 Ethereum, with accumulated losses exceeding $700 million.

Some early investors in the crypto market told Tencent News's "Deep Dive": "Selling 630,000 Ethereum means that Yi Lihua has completely surrendered this time."

The entire process was extremely fast, with "nearly $800 million lost in just 6 days." According to the crypto data platform Arkham, from November 11, 2025, when he began building his position, Yi Lihua's holdings peaked at 651,000 Ethereum by January 25, 2026; from February 1, when he began selling, it only took 6 days to liquidate his entire position.

“A staunch believer like him has already weathered multiple bull and bear markets in the crypto market. After making the decision to liquidate his holdings, all that’s left is to wait for the next opportunity to turn things around,” an early market participant told Tencent News’s “Deep Dive.”

Yi Lihua may have become the most well-known Chinese veteran of the crypto market to be targeted in this round of crash. Arkham data shows that Yi Lihua's cumulative losses in this round reached $779 million, with peak losses reaching $848 million.

Capital backlash: The ruthless departure of traditional funds

"In this round of crash, some traditional investors who entered the crypto market over the past two years have also been severely affected," Albert Luxon, a fund manager at a Singapore-based macro hedge fund, told Tencent News's "Deep Dive." He added that most of these traditional funds entered the market by buying ETFs.

The US approved a Bitcoin ETF in January 2024, after which the price of Bitcoin continued to rise, attracting a large influx of traditional capital. Public data shows that the size of US Bitcoin ETFs reached an all-time high in October 2025, with total assets under management of approximately $168 billion across 12 Bitcoin ETFs. At that time, the price of Bitcoin also climbed to an all-time high, exceeding $120,000.

“Once the market becomes volatile, these traditional funds will prioritize reducing their holdings of more volatile Bitcoin assets,” Albert Luxon told Tencent News’s “Deep Dive”.

Data confirms this. On January 29, when markets, including the US stock market, experienced significant volatility, outflows from Bitcoin ETFs increased markedly. Public data shows that on January 29 and 30, when US stocks and commodities markets fluctuated sharply, the net outflows from 12 Bitcoin ETFs were $817 million and $509 million, respectively. Meanwhile, on February 4 and 5, when Bitcoin prices plummeted, the net outflows were $544 million and $434 million, respectively.

Tencent News's "Deep Dive" learned from some private banking managers that quite a few high-net-worth clients did indeed redeem their cryptocurrency asset allocations in the past week.

Narrative disillusionment: A new crypto winter following a false boom

Most people would not deny that a new winter has arrived in the crypto market: from Bitcoin's peak of over $120,000 in October 2025 to its current price of around $68,000, the price has nearly halved.

Faced with the sharp drop, investors are in a panic. Explanations for the market crash are varied: some believe it's due to early investors taking large profits after the bull market; others argue that Bitcoin ETFs and other new products have diluted Bitcoin's scarcity since it entered the compliant market; still others attribute it to "liquidity exhaustion"—a near-universal factor in financial market crashes.

Allen Ding, head of the Newfire Technology Research Institute, stated that these explanations all have some merit, but the true core driving factor may not have a single answer. He believes that the consensus itself may have become divided. In his view, some staunch believers believe that Bitcoin has now partially integrated into mainstream finance, completing a certain "milestone," equivalent to "graduating from their faith."

Crypto evangelist and investor Anthony Pompliano, analyzing the reasons for Bitcoin's recent plunge on Friday, stated that Bitcoin breaking through $100,000 was itself an important "milestone."

Many industry insiders, including Allen Ding and Albert Luxon, a fund manager at a Singapore-based macro hedge fund, said that "profit-taking" was one of the key driving factors behind the recent plunge.

They believe that a large number of early investors are eager to lock in profits, which stem from the "frenzy" sparked by Trump's election as president and his promise to make the United States the "crypto capital of the world," driving up the prices of assets such as Bitcoin and Ethereum.

The returns for these relatively early investors are astonishing. For example, Bitcoin's price doubled between Trump's decision to run for president and early October 2025.

"Plunge" or "boom" is not uncommon in the crypto market. These industry veterans, who have been deeply involved in the sector for many years, told Tencent News's "Deep Dive" that this round of price fluctuations is significantly different from previous ones: the bull market since 2024 has been more about "narrative" than genuine industry innovation.

The aforementioned Hong Kong-based entrepreneur stated that in the four-year bull and bear cycle of the crypto market, the earliest year was 2013 when exchanges were born, followed by 2017 when smart contracts appeared, and 2022 when DeFi (decentralized finance) products emerged: these innovations provided fundamental support for the previous bull markets.

However, this bull market in 2024 had nothing to do with innovation; it was primarily driven by narrative.

He cited the example of how the initial "Trump narrative" and the MSTR treasury model did not change the fundamentals. While Trump did promise major policies after taking office, the market overlooked the fact that the Trump family was using cryptocurrency to predatoryly extract funds from the market. Michael Saylor's treasury company model (the MSTR model) involved publicly traded companies buying Bitcoin as an asset, resulting in MicroStrategy holding over 710,000 Bitcoins. This did indeed drive up the stock price and the price of Bitcoin, pushing the company's market capitalization to over $120 billion at one point. However, this model was unsustainable—the company lost over $12 billion in the fourth quarter of last year.

According to Tencent News' "Deep Dive," in August 2025, prominent Chinese figures in the cryptocurrency market, including Changpeng Zhao and Li Lin, were eager to try this model, but ultimately gave up in October 2025.

"Without innovation, relying solely on narrative is insufficient to sustain a bull market. However, they also cannot predict how long a bear market will last without a new narrative to take over."

Some more optimistic people believe that this downturn may end sooner than in the past. Currently, apart from Yi Lihua, no other top billionaires or leading companies have gone bankrupt or fallen into crisis, and no institutions have been accused of violations—situations that have repeatedly triggered crises of investor confidence during past market crashes.

Michael Saylor, one of Bitcoin's biggest bulls, told investors on February 6 that the only way to deal with the current downturn is to hold on—ignore market volatility and take a long-term view over a four-year period.

On February 7th, the price of Bitcoin rebounded slightly to $68,000, still at a low level compared to the past two years. This current downturn is unlikely to end anytime soon, and Bitcoin still has a long way to go before breaking the $100,000 milestone again.

However, some funds that are looking to buy on dips have already begun to act. Tencent News's "Deep Dive" has learned that a Hong Kong-based fund began buying on the dip on February 6th, though the specific size of the investment is currently unknown. In addition, Newfire Technology, a Hong Kong-based private banking service provider specializing in crypto assets, has received numerous inquiries about buying in the past two days.