Ruthless wipeouts back to back! The gains of the first ten months this year in the crypto market were all lost in just one month.
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The cryptocurrency market has almost erased all of the gains accumulated in the first ten months of this year within just over a month.
After experiencing a week of sharp declines, Bitcoin’s price stabilized and rebounded late Friday, rising above $103,000, but still down about 18% from the record high of $120,000 set on October 6.
(Bitcoin rebounded this week after twice falling below $100,000)
According to CoinGecko data, the total cryptocurrency market capitalization reached a historic high of nearly $4.4 trillion on October 6, but has plummeted about 20% over the past month, leaving the asset class’s year-to-date gain at only 2.5%.
The weakness in cryptocurrencies is making some people on Wall Street nervous, since Bitcoin is now seen as a leading indicator for highly volatile segments of the US stock market. The once reliable “buy the dip” strategy appears to be failing, further intensifying market caution.
Speculative Frenzy Cools, AI and Crypto Assets Correct in Tandem
This round of cryptocurrency crash coincided almost simultaneously with valuation concerns for AI tech stocks, reflecting cooling risk appetite in high-risk assets.
WallstreetCN noted that driven by worries about real returns from AI and excessive valuations, US tech stocks suffered their worst week since April.
Peter Atwater, professor of behavioral economics at William & Mary, said one of the biggest blows to speculator sentiment was the AI concept stock Palantir falling 8% the day after posting earnings that beat estimates. He noted:
Palantir, AI, and cryptocurrencies are all in the same sector—favorites among retail investors, so this is a group phenomenon.
Meme stocks, recent IPOs, and unprofitable tech stocks, all highly watched by retail investors, have retreated from recent highs. These indexes are down more than 10% from peaks reached in the past month or two.
(Meme stock index fell over 10% from peak)
BTSE’s Chief Operating Officer Jeff Mei warned that worries about high valuations in AI stocks are partly to blame for the decline in digital assets. He stated:
If we see a selloff in AI and tech stocks, Bitcoin may decisively fall below the $100,000 mark, with altcoins seeing even steeper declines.
“Buy the Dip” Strategy Fails, Investor Confidence Shaken
As market sentiment reverses, investor behavior has changed markedly. The resilient “buy the dip” mentality of the past year is now being seriously tested.
According to reports, Mark Hackett, Chief Market Strategist at Nationwide said:
Until just weeks ago, any reasonable pullback in Bitcoin or popular tech stocks would quickly be bought up, but we’re not seeing that any longer.
He added, it’s too early to tell if investors’ behavioral patterns have fundamentally shifted, but he’s watching the trend closely.
Fund flow data confirms this hesitation. According to Bloomberg, in just the past week, investors pulled over $700 million from digital asset ETFs, with nearly $600 million taken out from BlackRock’s Bitcoin fund.
Meanwhile, altcoins have performed even worse. Augustine Fan, a partner at SignalPlus, said:
Outside of Bitcoin and Ethereum, most of the crypto market has been on the defensive for months, with almost no new money flowing into altcoins or DeFi projects.
Marex analyst Ilan Solot wrote in a report:
There simply isn’t enough new capital to offset exits by local investors. For the uptrend to resume, the “whales” need to stop selling.
A few weeks ago, a leveraged position worth around $19 billion was suddenly liquidated, and the market still hasn’t recovered from that shock.
Market Canary? Bitcoin Seen as Leading Indicator of Risk Appetite
In the eyes of Wall Street analysts, Bitcoin’s role is increasingly like a “canary in the coal mine,” its price swings acting as a lead indicator for high-volatility tech stocks and retail investor liquidity.
Eric Balchunas of Bloomberg Intelligence described:
Bitcoin has a knack for sniffing out trouble early. It trades 24/7, like a 7-Eleven, which gives it extra opportunities to be a price discovery tool.
And now this leading indicator has issued a worrying signal. According to a Citi report, the number of “whale” investors holding large, long-term positions is declining.
In the past, this group would typically hold through even the most intense sell-offs. Now their wavering is deepening concerns about tightening liquidity.
Louis LaValle, CEO of Frontier Investments, a crypto investment firm, warned:
If Bitcoin breaks below the key $100,000 support, it may signal that the selloff isn’t over, and in the near future could fall below $70,000.
Risk Warning and DisclaimerThe market is risky, investing must be prudent. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial circumstances, or needs of individual users. Users should consider whether any opinions, views, or conclusions expressed herein are suitable for their particular situation. Investments made according to this article are at your own risk. ```