Bitcoin has fallen below the $95,000 mark for the first time in nearly six months, signaling a potential erosion of its year-long gains.
Amidst increasing risk aversion in global markets, investors have withdrawn approximately $900 million from their Bitcoin funds.
The price of BTC experienced a significant decline, dropping as much as 4.7% to $94,147 during the day. Bitcoin had previously reached an all-time high of $126,251 in early October and closed the year 2024 at $93,714.
Options Market Shows Increased Demand for Downside Protection
The options market has witnessed a surge in demand for downside protection over the past 24 hours. Data from Deribit indicates that interest in put options at the $85,000 and $90,000 levels has now surpassed the interest in call options at $120,000 and $140,000, which had dominated the market throughout the year. As Bitcoin had been steadily climbing to new highs for months, call options above $100,000 had become the most popular contracts.
Market Capitalization Wiped Out Following Liquidations
Following approximately $19 billion in liquidations on October 10, the total cryptocurrency market capitalization saw a reduction of $1 trillion. Liquidations, particularly affecting long positions, accelerated throughout the week. According to data from Coinglass, futures open interest has struggled to recover since the significant crash experienced in early October.
Fear and Greed Index Nearing "Extreme Fear" Zone
CoinMarketCap's fear and greed index is approaching the "extreme fear" zone. This indicates that expectations for further selling waves in the market are strengthening among investors.
Bitcoin-Focused ETFs Experience Significant Outflows
Bitcoin-focused exchange-traded funds (ETFs) have recorded net outflows totaling approximately $870 million. This represents the second-largest daily outflow observed since these products were initially launched.
Economic Uncertainty Dampens Market Optimism
The brief period of optimism that emerged from the government shutdown in US stock markets earlier this week has quickly dissipated. The postponement of key economic data releases has led investors to reassess their expectations for near-term Federal Reserve rate cuts.
Expert Analysis on Bitcoin's Decline
Max Gokhman, Deputy CIO at Franklin Templeton, commented that the current sell-off is entirely consistent with broader weakness observed in risk assets. However, he noted that the severity of Bitcoin's decline is amplified due to the inherent volatility of cryptocurrencies.
Market depth has decreased by approximately 30 percent from its yearly peak, according to data from Kaiko. This reduction in market depth is contributing to larger orders having a more pronounced impact on price movements.
Augustine Fan, a partner at SignalPlus, observed that Bitcoin has now turned negative since President Trump's inauguration. He also stated that the overall crypto market capitalization has returned to its year-to-date level, and there is no strong technical support visible below the $90,000 level.
Nick Ruck of LVRG Research highlighted that investors are increasingly shifting towards neutral volatility strategies, such as straddles and strangles.