The fear and greed index, a gauge of market sentiment on crypto data platform CoinMarketCap, is nearing ‘extreme fear’, indicating the rising expectations for future sell-offs
[NEW YORK] Bitcoin fell below US$95,000 for the first time in about six months as a bout of risk aversion sweeping across markets saw investors pull nearly US$900 million from funds investing in the token.
The largest digital-asset is on the verge of wiping out its gains for the year, dropping as much as 4.7 per cent to US$94,147. Bitcoin traded at a record high of US$126,251 in early October. It ended 2024 at US$93,714.
Demand for downside protection has been surging over the last 24 hours in the options market. Open interest around puts at strikes of US$85,000 and US$90,000 has surpassed bullish bets on the levels of US$120,000 and US$140,000 as the most popular contracts, according to data by crypto exchange Deribit by Coinbase.
Calls with the strikes above US$100,000 had dominated the options market this year as Bitcoin kept breaking new highs over the last several months.
The crypto market remains under strain after US$19 billion in liquidations on Oct 10 in turn erased over US$1 trillion from the total market value of all cryptocurrencies, CoinGecko data shows.
Liquidations in long positions has been steadily rising during the week with open interest in crypto futures struggling to recover since the market crash in early October, according to data from Coinglass.
The fear and greed index, which is a gauge of market sentiment on crypto data platform CoinMarketCap, is nearing “extreme fear”, indicating that the rising expectations for future sell-offs.
Meanwhile, exchange-traded funds investing in Bitcoin saw net outflows of about US$870 million on Thursday (Nov 13), the second-largest daily withdrawal since their debut.
A brief rebound in US equities earlier during the week, driven by relief over the end of the government shutdown, quickly faded.
With key economic data releases delayed, traders were questioning whether the Federal Reserve can justify near-term rate cuts – a reassessment that’s putting fresh pressure on riskier corners of the market.
“The current sell-off is fully correlated with other risk assets, but the magnitude in crypto is larger given its higher volatility,” said Max Gokhman, deputy chief investment officer at Franklin Templeton Investment Solutions. “Crypto’s beta to macro risks will stay high until deeper institutional participation broadens beyond Bitcoin and Ether.”
Thinning liquidity
Liquidity has also thinned sharply. Market depth – the market’s capacity to absorb large trades without suffering big price swings – has fallen roughly 30 per cent from this year’s high, according to Kaiko.
“With Bitcoin now having turned negative since President Trump’s inauguration, and the overall crypto market cap having round-tripped year to date, there is not much technical support from here to the low US$90,000, with sentiment likely to stay depressed until further notice,” said Augustine Fan, partner at SignalPlus.
In the options market, traders are increasingly positioning for volatility, with demand rising for neutral strategies such as strangles and straddles, according to Nick Ruck at LVRG Research.
Adding to the market anxiety was the slide in the value of the shares of Bitcoin accumulator Strategy, putting the company’s enterprise value at risk of dropping below the value of its roughly US$60 billion Bitcoin holdings. The stock fell about 4 per cent on Friday, and is down more than 30 per cent this year.
Enterprise value
The company’s enterprise value, which includes outstanding debt and preferred equity, was about US$74.8 billion as at Thursday, according to data compiled by Bloomberg.
During an interview with CNBC on Friday morning, Michael Saylor said that Strategy is buying “quite a lot” of Bitcoin and will disclose its latest purchases on Monday. The price of Bitcoin should “rally from here”, the Strategy co-founder and chairman said. Earlier on Friday, Saylor sent a post over the X social network with the crypto catchphrase “hodl,” which means hold, suggesting investors shouldn’t panic and continue to hold onto their Bitcoin. BLOOMBERG
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