Bitcoin is poised to record its worst monthly performance since the series of corporate failures that shook the cryptocurrency landscape in 2022. The leading cryptocurrency experienced a decline of up to 7.6%, dropping to $80,553 before recovering slightly on Friday. Meanwhile, its closest competitor, Ether, saw a decrease of as much as 8.9%, falling below the $2,700 mark, while numerous smaller cryptocurrencies also faced similar downturns. Data from CoinGecko indicates that the total market capitalization of digital currencies has dipped below $3 trillion for the first time since April.
According to Bloomberg’s compiled data, Bitcoin has lost nearly 25% of its value throughout November, marking its steepest decline for a single month since June 2022. The turmoil began with the collapse of Do Kwon’s TerraUSD stablecoin project in May of that year, which triggered a cascade of corporate failures, culminating in the downfall of the FTX exchange, led by Sam Bankman-Fried. Despite a supportive environment for cryptocurrency under the Trump administration and increased institutional interest, Bitcoin has plummeted over 30% since reaching an all-time high in early October.
This downturn follows a significant wave of liquidations on October 10, which resulted in the loss of $19 billion in leveraged token positions, consequently erasing approximately $1.5 trillion from the total market value of all cryptocurrencies. Chris Newhouse, the director of research at Ergonia, a decentralized finance firm, commented on the situation, stating, “The combination of forced liquidations and sales from structural ETFs has left the market in a precarious position, making any stabilization efforts immediately countered by selling pressure from various sources.”
In the past 24 hours alone, selling pressure has escalated, with an additional $2 billion in leveraged positions liquidated, as reported by CoinGlass. The broader market conditions have not provided any relief; US stock markets, which had previously gained traction due to renewed optimism surrounding artificial intelligence following positive earnings from Nvidia Corp., experienced a downturn late Thursday as concerns grew over inflated valuations and uncertainty regarding a potential Federal Reserve rate cut in December. This fluctuation in stock prices continued to unsettle investors on Friday.
“The overall sentiment is extremely negative. It seems there is a forced seller in the market, and the depth of this issue remains uncertain,” noted Pratik Kala, a portfolio manager at the Australia-based hedge fund Apollo Crypto. A crypto wallet known as “Owen Gunden,” which has held Bitcoin since 2011, began selling off a total of $1.3 billion worth of the cryptocurrency in late October and completed its divestment on Thursday, as per an announcement from blockchain researcher Arkham Intelligence.
“Owen Gunden’s selling, when viewed in isolation, is relatively insignificant, akin to the ETF selling from yesterday, but its gradual sales over a month bring attention to a major theme affecting Bitcoin this year: early adopters are liquidating their holdings in substantial amounts,” remarked Vetle Lunde, head of research at K33. A sentiment index measuring various factors such as volatility, momentum, and demand for cryptocurrency has now reached its lowest point since the 2022 collapse, indicating “extreme fear” among traders. The index had a reading of 94 shortly after Trump’s election win just over a year ago.
Institutional investors appear hesitant to capitalize on the current market weakness. A group of 12 Bitcoin exchange-traded funds (ETFs) listed in the US experienced net outflows totaling $903 million on Thursday, marking the second-largest single-day redemption since their launch in January 2024. Open interest in perpetual futures has also decreased by 35% from its peak of $94 billion in October. Tony Sycamore, an analyst at IG Australia, suggested that the market may be looking to test the limits of Strategy Inc., referring to the original Bitcoin hoarder, Michael Saylor. The mNAV, which indicates the ratio of enterprise value to Bitcoin holdings for Strategy, has plummeted to just above 1.2. Analysts at JPMorgan Chase & Co. have issued warnings that Strategy could be removed from benchmarks like the MSCI USA and Nasdaq 100, with a decision expected by January 15.
Companies attempting to emulate Saylor’s crypto accumulation strategy this year are facing similar pressures, with firms such as Sequans Communications, ETHZilla, and FG Nexus selling portions of their holdings to finance stock buybacks aimed at bolstering their declining share prices. Bitcoin has now recorded its 11th consecutive lower low, marking the longest such streak since 2010, according to Bloomberg’s analysis. “Many individuals within the crypto space have faced significant losses, leading to a widespread aversion to risk-taking. This has resulted in a general trend of de-risking across major cryptocurrencies and altcoins, as many aim to safeguard their investments for the year,” explained Bohan Jiang, a senior derivatives trader at FalconX.
