Bitcoin is poised to experience its most significant monthly decline since a series of corporate failures shook the cryptocurrency market in 2022. The leading digital asset dropped as much as 7.6% on Friday, falling to $80,553. In a similar trend, Ether saw a decrease of up to 8.9%, dipping below $2,700, while many smaller cryptocurrencies mirrored these losses. Overall, the market capitalization of cryptocurrencies fell below $3 trillion for the first time since April, as reported by CoinGecko.
According to Bloomberg’s compiled data, Bitcoin has lost approximately 25% of its value in November, marking its worst monthly performance since June 2022. This decline follows the collapse of Do Kwon’s TerraUSD stablecoin project in May of the previous year, which triggered a chain reaction of corporate failures culminating in the downfall of Sam Bankman-Fried’s FTX exchange. Despite a pro-crypto administration during Donald Trump’s presidency and increasing institutional interest, Bitcoin has plummeted over 30% since reaching an all-time high in early October. This downturn was exacerbated by a major liquidation event on October 10, which wiped out $19 billion in leveraged token positions and erased about $1.5 trillion from the total market cap of cryptocurrencies.
Recent selling pressure has escalated, with an additional $2 billion in leveraged positions liquidated within the last 24 hours, according to CoinGlass data. The overall market environment has not aided the situation. US stocks, which had previously gained momentum due to renewed interest in artificial intelligence following positive earnings from Nvidia, saw a reversal late Thursday as concerns about inflated valuations and uncertainty surrounding a potential Federal Reserve interest rate cut in December took hold.
“The market sentiment is overwhelmingly negative. There seems to be a forced seller present, and it is uncertain how far this trend will continue,” commented Pratik Kala, a portfolio manager at Apollo Crypto, a hedge fund based in Australia. A crypto wallet identified as “Owen Gunden,” which has held Bitcoin since 2011, began liquidating a total of $1.3 billion worth of the cryptocurrency in late October, finally selling its last Bitcoin on Thursday, as indicated by a post from blockchain analysis firm Arkham Intelligence. A measure of crypto investor sentiment, which assesses factors such as volatility, momentum, and demand, has dropped to its lowest point since the 2022 crisis, currently reflecting “extreme fear” among traders. This index was at 94 just after Trump’s election victory a little over a year ago.
Institutional investors appear hesitant to capitalize on the market’s downturn. Twelve US-listed Bitcoin exchange-traded funds recorded a net outflow of $903 million on Thursday, marking their second-largest single-day redemption since their launch in January 2024. Additionally, open interest in perpetual futures has decreased by 35% from its October peak of $94 billion. Tony Sycamore, an analyst at IG Australia, mentioned in a report that the market “might also be probing Strategy’s pain threshold,” referring to the original Bitcoin hoarding strategy pioneered by Michael Saylor. The mNAV (market value to Bitcoin holdings ratio) for Strategy Inc. has plummeted to just above 1.2. In a recent note, JPMorgan Chase & Co. analysts cautioned that Strategy could risk being removed from key indices like the MSCI USA and Nasdaq 100, with a decision anticipated by January 15.
Additionally, companies that tried to mimic Saylor’s Bitcoin accumulation strategy this year are facing challenges. Firms like Sequans Communications, ETHZilla, and FG Nexus are selling portions of their holdings to finance stock buybacks aimed at bolstering their declining share prices. On Friday, Bitcoin recorded its 11th consecutive lower low, marking the longest stretch of declines since 2010, based on Bloomberg’s analysis.
