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Bitcoin dropped to a six-month low of $93,000 on Sunday, which corresponds to a 25% loss from its peak reached in early October. Analysts from the Kobeissi Letter describe the move as part of a new "structural" bear market, rather than a reaction to immediate events in the markets.
The fall came as a surprise to the observers because there were no fundamental developments. Inflation is slowly coming down, the Federal Reserve has lowered interest rates, and Washington and Beijing are close to closing on a trade deal. These conditions usually provide a more bullish environment for cryptocurrencies.
Analysts point to the institutional outflows that started in mid-to-late October as the cause of the structural bear market. Crypto-focused funds saw $2 billion in net outflows in the last week. The Kobeissi Letter highlights that these movements were over-leveraged, and this contributed to making the markets more volatile.
Daily liquidations are now large, with three separate days of the past 16 trading days seeing more than liquidation and many trading days over $500 million. Thin trading volumes coupled with high leverage have led to increased market instability through the amplified price movements in either direction.
Also Read: Crypto Prices Today: Bitcoin Price at $94,931, Ethereum Drops 0.72% as Liquidations Hit $389 Million
Investor sentiment has changed dramatically. The Fear and Greed Index was at the lowest level since February, showing an elevated level of caution despite Bitcoin remaining 25% off its April lows. Analysts point out that leverage increases these sentiment changes, leading to more extreme responses to market movements.
Despite the structural downturn, the fundamental outlook is positive. Analysts have argued that the underlying value of the cryptocurrency market has improved. They are predicting that the current volatility will calm down as leveraged positions unwind, which would mean that Bitcoin could be approaching a market bottom in the near future.
Market observers continue to monitor the flows and liquidation levels of Bitcoin ETFs for clues on the timeline of recovery. Analysts emphasize that while short-term swings may continue to be extreme, the bear market structurally is driven by mechanical and institutional factors rather than fundamental weaknesses.
