Bitcoin Enters a New Phase: Understanding the Latest Bear Market

Bitcoin’s value took another dive on Sunday, hitting a six-month low of $93,000. While the reasons for this downturn may seem unclear, analysts from the Kobeissi Letter argue that a new ‘structural’ bear market phase is underway, deeply affecting the cryptocurrency landscape.

Causes of the Dip

The analysts indicate that Bitcoin has suffered a 25% loss since reaching its all-time high in early October. Despite the lack of significant bearish catalysts, this decline is particularly peculiar. They stated:

“There haven’t been many material bearish developments on the fundamental side of crypto. Just days ago, President Trump said America being ‘number one in crypto’ is his top priority.”
(Translation: There have been no major negative developments in the crypto market. Recently, President Trump emphasized that making America the leader in crypto is crucial.)

Interestingly, with US inflation decreasing and the Federal Reserve lowering interest rates, alongside talks of a trade deal between Washington and Beijing, the environment seems comparatively more favorable than it was earlier this year.

The bear market has been categorized by the analysts as both structural and mechanical, starting with institutional outflows that were notable in mid-October. The numbers reflect a record $1.2 billion net outflows from crypto-focused funds during the first week of November.

Market Dynamics

With excessive leverage exacerbating these outflows, the Kobeissi Letter elaborated:

“As a result, when these sudden downswings happen in crypto, liquidations surge.”

They elaborate that on October 10th, liquidation events reached -$19.2 billion, a record event contributing to the volatile market conditions.

What’s Next?

Looking ahead, the analysts observed that three out of the last sixteen trading days recorded liquidations surpassing $1 billion. With daily liquidations exceeding $500 million becoming the norm, the combination of this with thin trading volumes leads to significantly volatile price movements.

The current sentiment in the market has also shifted, with the Fear and Greed Index indicating extremely low confidence levels among investors. However, the analysts concluded that the fundamental value of the cryptocurrency market is strengthening, revealing optimism that the bottom is approaching and will eventually stabilize the market.

As they concluded:

“When you really zoom out, it seems that crypto is in a structural bear market. The fundamental value of crypto has only improved, but market dynamics are shifting.”
(Translation: Overall, while crypto is in a challenging phase, its essential value continues to grow as conditions change in the market.)