TLDR:
- Bitcoin has fallen 10% below its post-election price, erasing all gains made after Trump’s November victory.
- Crypto markets lost $2.2 trillion in value since October 10, marking a 50% decline driven by structural issues.
- Record $19.5 billion liquidation on October 10 triggered market structure breakdown that persists through today.
- Bitcoin market depth remains 30% below October peaks, matching conditions last seen after 2022 FTX collapse.
Bitcoin has wiped out all gains made since the November election, falling 10% below its post-election level as broader crypto markets collapse.
The Kobeissi Letter reports that cryptocurrency markets have plunged 50% since October 10, eliminating $2.2 trillion in total market capitalization.
This structural decline has left investors searching for answers amid persistent selling pressure and deteriorating market conditions.
Market Structure Breaks Down Following October Liquidation Event
The current downturn traces back to October 6, when crypto markets reached their most recent peak. Four days later, on October 10, markets experienced a record $19.5 billion liquidation event that appears to have triggered a fundamental shift in market structure.
Bitcoin never fully recovered from this shock, entering a prolonged range-bound period between November 15 and January 15.
During this consolidation phase, brief liquidation episodes created price gaps in both directions. These erratic movements signaled underlying weakness in market structure rather than healthy price discovery.
The range finally broke to the downside on January 16, marking the beginning of an accelerated decline. Since January 24 alone, leveraged positions worth $10 billion have been liquidated, representing 55% of the record October amount.
The selling pressure has not remained contained within crypto markets. Large-cap technology stocks have declined sharply despite reporting strong earnings and experiencing minimal fundamental changes.
This cross-asset contagion suggests the decline stems from liquidity issues rather than crypto-specific problems. Market depth data supports this view, with Bitcoin’s order book capacity still sitting 30% below October peaks.
The Kobeissi Letter noted that such depleted market depth was last observed after the FTX collapse in 2022. Today’s session proved particularly severe, with Bitcoin dropping over $9,000 amid constant selling pressure.
At certain points, prices fell $2,000 or more within minutes, suggesting large institutional players may have liquidated positions during the trading day.
Sentiment Collapse Fuels Self-Reinforcing Downward Cycle
Market sentiment has declined in near linear fashion since October 10, according to The Kobeissi Letter analysis. Even temporary relief rallies have failed to reverse the bearish mood among traders and investors.
This sentiment deterioration has created a vicious cycle, where a negative outlook leads to liquidations, which further damages sentiment and triggers additional selling.
The fundamental picture for cryptocurrencies has remained largely unchanged over the past 60 days. This disconnect between fundamentals and price action has left many market participants confused about the drivers behind the current decline.
Previous crypto market cycles demonstrate that sentiment often matters more than underlying fundamentals during periods of extreme volatility.
The absence of fundamental catalysts for the decline points toward technical and structural factors as primary drivers. Leverage unwinding continues to pressure prices lower as margin calls force position closures.
The combination of thin liquidity and high leverage amplifies volatility in both directions, creating treacherous trading conditions for market participants.
Recovery appears contingent on restoring structural liquidity to crypto markets. This process will likely require both capitulation in price and leverage, along with sentiment reaching maximum bearish levels.
The Kobeissi Letter suggests markets may be approaching these conditions, though the exact timing of any bottom remains uncertain.
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