Bitcoin is currently teetering on the brink of a bear market, just weeks after reaching an all-time high of $126,100. The cryptocurrency experienced its first losing October in seven years, dampening hopes for a bullish month often referred to as “Uptober.” According to Alex Kuptsikevich, chief market analyst at FXPro, the sentiment index has plummeted to 21, signifying extreme fear among investors. This decline marks the lowest sentiment level since April 9, suggesting a precarious atmosphere for bitcoin enthusiasts.
At present, bitcoin is trading below $103,000, reflecting an 18% decline from its peak earlier this month. The drop has been significantly influenced by a volatile market that has been shaken by trade uncertainties, a monumental liquidation event, and a reassessment of rate-cut expectations following the latest Federal Reserve meeting. Haonan Li, founder of blockchain firm Codex, characterized the situation as one of “pure exhaustion,” indicating that while bitcoin itself may not be in a bear market, many alternative cryptocurrencies (alts) are suffering.
One of the critical catalysts for this downturn was a historic liquidation event on October 10, where bitcoin investors liquidated nearly $19 billion worth of positions within just 24 hours. Estimates indicate that this figure may actually be closer to $30 billion, marking it as one of the largest liquidations in bitcoin history. Jonathan Man, a portfolio manager at Bitwise, emphasized the fragility of the market, adding that the rapid unwinding of positions was nearly indifferent to the news that triggered it.
The fallout from this liquidation event has created lasting concerns among market participants. Experts warn that heightened volatility might lead to further liquidations; a mere 10% shift in bitcoin’s price could provoke substantial sell-offs, exacerbating market instability. Farzam Ehsani, CEO of crypto trading site VALR, highlighted that approximately $11.39 billion in short positions could be liquidated if the price rises, while a decline could lead to the liquidation of about $7.55 billion in long positions.
Recent developments in the broader macroeconomic landscape have further influenced bitcoin’s direction. The uncertainty surrounding tech stock valuations and the Federal Reserve’s stance on interest rates has placed added pressure on risk assets, including cryptocurrencies. Following a statement from Fed Chairman Jerome Powell, indicating uncertainty about future rate cuts, bitcoin experienced an additional sell-off. Unlike the stock market, which has benefited from the AI trade, bitcoin currently lacks a similar driving catalyst, leading traders to seek technical indicators that may signal a turnaround.
Market observers note that the intertwining decline of both stocks and bitcoin has caused a shift in investor behavior, with capital moving from cryptocurrency to equities during this tumultuous period. The broader market outlook remains uncertain, with notable crypto bulls projecting bitcoin prices around $200,000—a figure that would require a substantial rally of nearly 95% in less than two months.
With potential trade challenges ahead, ambiguous future interest rates, and concerns regarding the implications of a government shutdown on economic indicators, many investors are hesitant to commit to market entry points at around $120,000. Guillermo Fernandes, founder of analytics firm Blockpliance, noted that the existing uncertainties create barriers for buyers, leading to a cautious sentiment in the current crypto landscape.
