Market Disconnect and Historical Context
Bitcoin's sharp underperformance versus equities has created a significant disconnect from fundamentals, according to K33 Research. Head of Research Vetle Lunde stated the 36% downturn from all-time highs presents a compelling long-term entry point for investors.
The cryptocurrency has underperformed the Nasdaq in 70% of sessions over the past month, a pattern only seen a handful of times since 2020. Bitcoin now trades 30% weaker relative to the index compared to Oct. 8 levels. Previous stretches of similar underperformance coincided with crypto-specific shocks, including Mt. Gox sales, Grayscale outflows, and contagion effects.
Divergence from Prior Cycles and Potential Catalysts
Lunde emphasized that today's market structure differs materially from prior cycles. Crypto initiatives from Tier-1 banks enabled by the Clarity Act and upcoming policy catalysts may broaden access to the cryptocurrency. K33 views current relative pricing to other risk assets as a significant disconnect from underlying fundamentals.
Sell-Off Saturation and Trading Activity
The sell-off appears close to saturation based on extreme trading activity during Bitcoin's drop to $80,500 intraday low on Nov. 21. Spot volumes reached $14.3 billion that day, the sixth-highest of the year, with 169,523 Bitcoin traded.
Correlation with Equities and Persistent Selling Pressure
Correlations have surged with Bitcoin closely tracking equity moves but suffering sharper declines on down days and weaker rebounds on up days. This pattern reflects persistent selling pressure in a generally risk-off environment, according to the research firm.
Exchange-Traded Product Flows and Investor Sentiment
Exchange-traded product flows show signs of stress with daily outflows exceeding 10,000 Bitcoin occurring twice this month. Net outflows surpassed 62,000 Bitcoin over the past 30 trading days, reaching levels not seen since mid-March. Lunde described the surge in redemptions as elevated panic typical of environments where sentiment temporarily overshoots fundamentals.
Open Interest and K33's Investment Stance
CME open interest sits at seven-month lows near 132,000 Bitcoin, reflecting low risk appetite. K33 trimmed risk when Bitcoin traded at $95,000 on Nov. 15 but reentered with partial capital at $83,200 as panic intensified. The firm remains reluctant to reenter with full force amid elevated notional open interest in perpetual futures and typical w-shaped recovery patterns.