Bitcoin (BTC) has deepened its decline, losing nearly $800 billion in market value since its peak in October.
The wave of selling that has continued in recent weeks has wiped out all of the crypto gains throughout the year, raising the question: How long will this decline last? Back to the forefront of the market.
Bitcoin hit a year-to-date high of about $125,000 on October 6, but has since lost a third of its value. It fell below $82,000 today, but has since recovered slightly to $83,509. This price represents Bitcoin’s lowest level since April, according to CoinGecko data. Bloomberg reported that Bitcoin is posting its worst monthly performance since the 2022 crash.
Market uncertainty appears to have significantly reduced risk appetite for crypto assets. Wall Street discussions suggesting AI stocks may be overvalued are raising the possibility of a bubble in the tech sector. Analysts believe that tensions in tech stocks are also weighing on Bitcoin.
Thomas Chen, CEO of Function, said investors are hesitant in the current environment. “In this environment, the question of ‘Do I want to hold Bitcoin?’ is a serious one,” he said. is coming to the fore again. ”
Coin Bureau co-founder Nic Puckrin also emphasized the strong correlation between technology markets and cryptocurrencies, saying, “When technology sneezes, Bitcoin inevitably catches a cold.”
Additionally, weaker employment data and signs that the Fed is likely to hold off on cutting interest rates at its December meeting are accelerating the flight from risk assets.
One of the main reasons for the decline is the unwinding of leveraged trading. With futures products offering up to 10x leverage on Bitcoin on major platforms like Coinbase, even small price movements can lead to huge losses.
When a leveraged position becomes unprofitable and the investor can no longer afford to purchase collateral, the platform automatically liquidates the position. This mechanism quickly builds up selling pressure, making the decline even worse.
“Even the slightest reversal of over-leveraged open positions will trigger liquidations and accelerate the decline,” said Nigel Green, chief executive of DeVere Group.
Experts remind us that large declines in Bitcoin are not unusual historically and often result in strong recoveries.
Brian Wieten, an analyst at Sievert Financial, noted that Bitcoin has experienced five major corrections of 20-30% or more during the bull market, and said the current decline could be a “temporary correction.”
*This is not investment advice.
