Bitcoin (BTC-USD), the leading cryptocurrency, faced significant challenges last week, briefly dipping below the $100,000 mark, a level it hadn’t seen in six months. As of Friday, the cryptocurrency was trading approximately 20% lower than its all-time high of over $126,000, which was reached earlier this month on October 6.
Market analysts have linked this recent downturn to substantial offloading by early adopters of Bitcoin. Research from Compass Point analyst Ed Engel revealed that since late June, long-term holders have sold over 1 million bitcoins, contributing to the market’s decline. Furthermore, a major liquidation of leveraged crypto positions on October 10 has exacerbated the situation, pushing Bitcoin below crucial support levels of $117,000 and subsequently $112,000.
Markus Thielen, founder and CEO of Singapore-based 10X Research, expressed concerns about the current market conditions, stating, “We haven’t really reclaimed this level since then, and I think that’s a sign we are, unfortunately, in a bear market.” Thielen’s firm had previously forecasted that Bitcoin would dip to $100,000 but now suggests that the market might still be “a few weeks away” from hitting a buyable bottom. He cautioned that there is potential for further corrections.
According to 10X Research, the marginal buyer has receded from the market as capital that once pursued higher prices has either been purged or is no longer actively bidding. Additionally, fund managers holding long positions through exchange-traded funds may be compelled to reduce their holdings in response to declining asset prices.
Adding to the market’s woes, the dollar has shown signs of strengthening, which could serve as a headwind for Bitcoin and other cryptocurrencies. Thielen noted a lack of support below the $93,000 level, cautioning that further liquidations could potentially drive prices down to the $70,000 range.
Historically, early adopters, often referred to as “OG investors,” tend to sell at the peak of the market cycle only to re-enter later, a pattern Thielen believes might play out again in this instance.
However, there are potential bullish catalysts that could help lift Bitcoin’s prices in the future. One such factor is the possibility of a Federal Reserve rate cut in December, alongside expectations of a more dovish monetary policy as Chair Jerome Powell’s term is set to expire in May. Additionally, the potential reopening of the U.S. government may inject new liquidity into the markets, aiding the recovery of cryptocurrency prices.
Sean Farrell, head of digital assets at Fundstrat, highlighted that the ongoing government shutdown is suppressing liquidity conditions and exacerbating growth apprehensions in the market. As investors closely monitor these developments, the outlook for Bitcoin remains uncertain in the near term.
