In recent market developments, cryptocurrency experienced significant fluctuations, marked by a notable divergence from the broader U.S. stock market. On Tuesday, cryptocurrencies posted gains, with Bitcoin and other digital assets performing favorably even as major U.S. stock indices experienced losses. This outperformance was a rare occurrence, given the trend of cryptocurrencies remaining largely subdued while stock market averages consistently reached new record highs in recent months.
However, this bullish trend was short-lived. Just a day later, Bitcoin saw a sharp decline, tumbling 4% back below the $90,000 mark. Ethereum’s ether similarly fell, losing 6.5% to drop beneath the $3,000 threshold. The downward movement was reflected across various crypto-related equities, with firms such as MicroStrategy (MSTR) declining over 8% to hit levels not seen in over a year. Other companies connected to the crypto space, including Circle (CRCL), BitMine (BMNR), and mining firms like Bitfarms (BITF) and Hive Digital (HIVE), reported comparable losses.
In contrast to cryptocurrencies, the Nasdaq still managed to remain slightly above water, with a modest increase of 0.2% as the noon hour approached on the East Coast. Nevertheless, the overall sentiment within the crypto market appears grim. Following a sustained period of price declines since Bitcoin’s record highs in early October, investors have become increasingly risk-averse, as indicated by the Crypto Fear and Greed Index, which remains entrenched in the “Extreme Fear” category.
Research analyst Vetle Lunde from K33 highlighted the severity of the current market drawdown, noting that the decline—nearly 30% over the past 43 days—represents one of the most significant corrections compared to previous downturns recorded since March 2017. Lunde also pointed out that outflows from exchange-traded funds (ETFs) have exacerbated the situation. Recent data reveals that investors have withdrawn approximately $2.3 billion from U.S.-listed Bitcoin ETFs over the last five trading sessions.
“Bitcoin swept lows below the average cost basis of U.S. Bitcoin ETFs, and if the current drawdown aligns with the two most significant declines from the past two years, we could see a bottom form between $84,000 and $86,000,” Lunde stated. He further suggested that if the bearish trends continue, revisiting earlier lows, particularly MSTR’s average entry point of $74,433, may become a likely scenario.
