Many woke up to Bitcoin prices below $90,000, only to see it reclaim this threshold later. Closing prices under $102,800 had fueled investor concerns regarding something more significant on the horizon last week. Although today’s market conditions aren’t surprising, such rapid declines are unsettling. So, what’s really happening in the crypto world?
What’s Happening in Cryptocurrency Markets?
Over 40 days, the cryptocurrency markets have wiped away over $1.1 trillion, leading to an average loss of $27 billion daily. BTC reached its lowest price in seven months, resulting in billions of dollars being liquidated. Surprisingly, after a $20 billion liquidation on October 10, the cryptocurrency market capitalization stood roughly 10% higher than its current value.
Institutional exits accelerating from mid to late October were key signals in the crypto market. The extensive use of leverage in crypto magnifies its volatility, causing a domino effect among investors. There is a significant relationship between leverage and spot prices, and the $19.2 billion liquidation on October 10 was both a cause and effect of BTC’s $20,000 price drop. While short squeezes were exciting during bull markets, the opposite is happening now.
Over the past two weeks, four days have seen liquidations exceed $1 billion. Daily liquidations of half a billion dollars have become the norm. Such conditions, especially during periods of low volume, lead to violent fluctuations in cryptocurrency prices.
The fear index suddenly dropped to 10, reminiscent of February 2025. Given the FUD (Fear, Uncertainty, Doubt) prevalent throughout the year, it’s understandable that investors are anxious. The market is currently experiencing the highest level of fear since tariffs began.
What to Expect?
A graph shared by TKL highlights the divergence between Bitcoin and Gold after the October tariffs. For over a year, Gold and Bitcoin moved in high correlation, acting as safe haven assets. Since early October, Gold has outperformed Bitcoin by 25 points. This implies that BTC is not viewed as a “safe haven” currently, despite the global monetary expansion. Meanwhile, the Fed plans to fully expand by early 2026.
The situation is even worse for Ethereum, which has plummeted over 35%. Ether represents tech stocks more than Bitcoin. Combining all these factors, the market suggests that cryptocurrencies are in a structural bear phase. However, this won’t last indefinitely. Cryptocurrencies have resolved many fundamental issues, and BTC, lingering in six figures for a while, needed a break. The adaptation to changing market dynamics is more intense in crypto, which will self-adjust and evolve. Cryptocurrency also quickly prices in approaching events. Hopefully, this week’s NVDA report, employment data, and Fed minutes offer some support.