Bitcoin extended its retreat from record highs on Tuesday, triggering a liquidation event that wiped out nearly $500 million in leveraged long positions and underscoring the volatile underpinnings of the recent rally.

At time of publication, Bitcoin’s price is down 1.2% over the past 24 hours and nearly 3% from its $126,080 record high set on Monday, according to CoinGecko data. Ethereum’s losses outpaced those of Bitcoin, with ETH trading down 4.6% on the day, at $4,492.

The market correction forced the closure of over $635 million in total leveraged crypto positions across exchanges in the past day, of which $489 million were long positions. Ethereum longs bore the brunt of the downturn, at $142 million, surpassing Bitcoin’s $114 million in long liquidations, per CoinGlass data.

Ryan Lee, chief analyst at universal exchange Bitget, told Decrypt that the sell-off is due to a confluence of factors, including profit-taking after a 10% rally over the last two weeks.

“Gold’s rebound this week has likely added to Bitcoin’s short-term pressure,” Lee said, explaining that some macro-focused capital is rotating into the precious metal. He pointed to “muddy macro signals” and a stronger dollar as creating a risk-off environment.

The U.S. dollar index (DXY), which measures the greenback’s strength against a basket of currencies, reached an intraday peak of 98.989 on Wednesday, up significantly from a September 17 low of 96.218, per TradingView data.

Lee views the drop as a healthy correction rather than a trend reversal, with another 3% to 4% drop before prices stabilize and attempt a breakout above $126,000. Sustained bullish momentum beyond the current record high could push Bitcoin to the $132,000 to $135,000 range, he suggested, a forecast contingent on improving market sentiment and sustained ETF inflows.

On prediction market Myriad, launched by Decrypt‘s parent company DASTAN, user sentiment has remained steadily optimistic over the past few days, with predictors placing a 57% chance on Bitcoin pumping to $140,000 rather than dropping to $110,000.

Despite the short-term pressure, the long-term drivers for Bitcoin remain intact, as previously reported by Decrypt.

Analysts point to a persistent “debasement trade” fueled by rising fiscal deficits and a search for assets immune to government mismanagement, which continues to support the bullish narrative for crypto’s flagship asset.

Echoing this structural optimism, Austin King, Co-Founder of unified decentralized finance trading terminal, Nomina, told Decrypt that he expects Q4 to be an “exciting quarter for the crypto industry,” as investors increasingly turn to Bitcoin as a hedge against global political instability.