Bitcoin, the world’s largest cryptocurrency, has entered a bear market just weeks after reaching an all-time high.
Bitcoin, which is approaching the $100,000 level, has lost 21% of its value since hitting a record high of $126,200 on October 6.
Bitcoin investors’ hopes for an Uptober breakout were dashed after experiencing their first losing October in seven years. Tuesday’s sharp 5% drop coincided with weakness in global risk markets, which have been shaken by valuation concerns stemming from the balance sheet issues of tech stocks like Palantir.
But analysts say selling pressure is nothing new. Bitcoin has been struggling for weeks with factors like shrinking trading volume, rising volatility, and weakening institutional appetite.
“The sentiment index fell to 21, the lowest level since April 9. There was a brief recovery when this zone was entered last month, but this time the market has fallen even below those levels,” said Alex Kuptsikevich, chief market analyst at FXPro.
Codex founder Haonan Li described the painting as “utter exhaustion.”
The sharp sell-off on October 10 triggered the largest long liquidation in history in Bitcoin futures.
“Even a 10% price movement could lead to massive liquidations, with $11.39 billion worth of short positions at risk of liquidation if the price rises and $7.55 billion worth of long positions at risk of liquidation if the price falls. This is turning the market into a powder keg,” said VALR CEO Farzam Ehsani.
The market has still not recovered following the liquidations. A series of liquidations at offshore derivatives exchanges in early October shook investor confidence.
According to Li, “liquidations were the beginning, now the macro view has taken control.”
This week, tech stock valuations, uncertainty surrounding the Federal Reserve’s interest rate cut plans, and the impending US government shutdown have dampened risk appetite overall. “As stocks and Bitcoin fell simultaneously, some investors sold their Bitcoin holdings to salvage their positions in the stock market,” said Marcus Sturdivant, managing director at ABC Squared.
*This is not investment advice.