Following the sharp declines in the cryptocurrency market in recent weeks, some analysts expect the selling pressure on Bitcoin to continue until the end of the year.
Compass Point analysts argue that closing positions in Bitcoin and Bitcoin ETFs, especially from new investors, will continue to push the price down.
Current Market Performance
Bitcoin, the largest cryptocurrency by market capitalization, is trading around $89,800 today. This represents a loss of over 20% in the past month and a nearly 30% retracement from its all-time high of just over $126,000, seen in early October.
The decline is driven by the liquidation of highly leveraged positions, investors moving out of risky assets and into safe havens like gold, valuation concerns about AI stocks, and cyclical expectations surrounding Bitcoin. According to Kompass Point, even some long-term investors are selling due to the controversial view that Bitcoin is tied to a four-year halving cycle.
Potential Signs of a Market Bottom
Analyst Ed Engel emphasizes that Bitcoin bear markets typically end with “wealth concentrated in stronger hands.” According to Engel, panic selling by investors who bought above $100,000 could be a sign of a bottom forming.
Engel notes that Bitcoin ETFs have also played a significant role in the current sell-off. According to the analyst, Bitcoin recently rebounded from its “Real Market Average” of $82,000. This level represents the average cost of investors in the current cycle and aligns with the average cost of Bitcoin ETF investors.
However, analysts are also watching for additional signals that could indicate the market has bottomed: increasing net holdings by long-term investors and negative forward funding rates, indicating liquidation of leveraged long positions. While Engel doesn't expect a situation as severe as past bear markets, he says they won't shift to a more positive view until they see “increasing holdings of HODLers and more aggressive shorting by futures traders.”