Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
Bitcoin plunged below $90,000 on Tuesday morning, marking a seven-month low amidst a broader crypto market downturn characterized by substantial outflows from spot Bitcoin and Ethereum exchange-traded funds (ETFs) and mounting macroeconomic uncertainty. The flagship cryptocurrency’s decline was notably influenced by recent transfers from Mt. Gox wallets, contributing to a significant shift in market sentiment.
Market Dynamics and Price Action
The cryptocurrency market has continued to deteriorate, with Bitcoin’s price dropping below $90,000 for the first time since April. Data from CoinGecko indicated a 4.5% decline in Bitcoin over the past 24 hours at the time of the drop, partly attributed to the transfer of approximately 185.5 BTC, valued at $16.8 million, from Mt. Gox wallets, according to Arkham data.
Despite the initial sell-off, Bitcoin saw a brief recovery, rising 2% over five hours from an intraday low of $89,368 to reach $91,474. The overall cryptocurrency market capitalization has experienced a significant contraction, falling 20% from $4 trillion on October 14 to $3.2 trillion by Tuesday.
Institutional Outflows Intensify
The market decline is further pressured by a deteriorating institutional demand, evidenced by significant outflows from spot Bitcoin ETFs. These funds recorded $2.59 billion in outflows during November, approaching the $3.56 billion total seen in February. BlackRock’s Bitcoin ETF, IBIT, particularly suffered a record single-day withdrawal of $463.1 million on November 14, according to Farside Investors data.
Similarly, spot Ethereum ETFs experienced a net outflow of $728.57 million last week, marking their third-largest withdrawal. This figure trails only May’s $787.74 million and September’s $795.56 million, as reported by SoSoValue data.
Shift to Risk Management
Shivam Thakral, CEO of Indian crypto exchange BuyUCoin, explained that the exodus of capital from exchange-traded funds signifies a market shift “from a momentum phase to a risk-management phase.” Thakral highlighted macroeconomic uncertainty, profit protection from early-cycle investors, and portfolio rebalancing following crypto’s exceptional rally in 2023 as key catalysts for these outflows.
Thakral emphasized that institutions are not exiting due to negative long-term sentiment but are rather responding to a lack of new catalysts, slowing ETF inflows, and a temporary move towards risk-off positioning. Experts suggest that clearer macroeconomic conditions are pivotal for restarting recovery and mitigating the possibility of a prolonged bear market.
Bitcoin’s Potential Downside
While Bitcoin could see further declines, Thakral believes the downside remains “relatively limited.” He suggested that if bearish flows persist, Bitcoin might revisit the $82,000 to $85,000 range, an area where significant long-term holder cost bases and ETF inflow clusters are concentrated.
Data from prediction market Myriad shows a considerable shift in market expectations; the chances of Bitcoin reaching $115,000 before $85,000 plummeted from 66.7% on November 13 to just 25% on Tuesday. (Myriad is owned by Decrypt’s parent company, Dastan).
