Bitcoin Fell Last Week to a Low of $80,500, a Level Not Seen Since April. According to experts, Bitcoin’s behavior has sent an early signal to the market that it is taking a breather, with a drop of approximately 33% (as of the close on November 22) from its October high, following a wave of $2.2 billion in liquidations.
“Although the recent correction has unsettled some investors, volatility of this magnitude is not unusual. Bitcoin has suffered several drops greater than 30% in recent years. The latest was between January and April, when it fell from $109,000 to $74,500 before rebounding 70% to the current all-time high of $126,300, although at that time the decline was more gradual than the ‘sharper correction’ we are seeing now,” explains Simon Peters, analyst at eToro.
In Peters’ opinion, despite these corrections, the price maintains a long-term upward trend, forming higher highs and higher lows. “Right now, we are in a 30% drawdown from the all-time high, so if recent history were to repeat itself, it’s possible that we are already at the bottom of this correction. On-chain indicators also show that large wallets (or whales) have started buying back,” he argues.
For Manuel Villegas, Next Generation Research Analyst at Julius Baer, the fundamentals of Bitcoin remain intact, as the long-term potential of a supply shortage continues, despite the short-term outflows from spot wrappers. “Risks from leveraged Digital Asset Treasuries persist, but the true drivers of the market are still not crypto-specific. Altcoins continue to be pure crypto beta,” he notes.
Tech Stocks, Data, and the Fed
In Villegas’ view, crypto market sentiment is depressed, reflecting an uncertain macroeconomic environment and a wave of risk aversion in equities despite strong results from tech companies. “The reality is that this correction is driven exclusively by macroeconomic factors and a wave of risk aversion in the stock markets. From a bottom-up perspective, context matters, and although spot Bitcoin vehicles have recorded short-term outflows, the long-term potential of a supply shortage remains intact. Bitcoin’s fundamentals are not that weak; demand exists, especially when we add ETFs to the companies holding cryptoassets in their treasuries, to the extent that, overall, they have far outpaced the supply growth rate since the beginning of the year. Flows into Ethereum and Solana ETFs have remained positive since the start of the year,” says the Julius Baer expert.
In addition, part of the experts’ interpretation is that this correction and subsequent rebound is related to new expectations of Fed rate cuts and the lack of data during the U.S. government shutdown. “On the macro front, the odds of a rate cut in December have increased since last week, to 71% according to CME FedWatch, after the president of the New York Federal Reserve, John Williams, stated on Friday that he expects the central bank to lower rates because the weakness in the labor market poses a greater threat than inflation. This has fueled a rebound in Bitcoin from its lows, and the crypto asset is trading this morning around $86,000,” adds the eToro expert.
Relevant U.S. data is expected this week, so favorable figures could sustain the small rebound currently seen in the crypto markets. “The delay in rate cuts by the Fed and the temporary liquidity outflow have affected risk assets. The short-term correlation between global liquidity and the price of Bitcoin is well documented,” says his colleague Lale Akoner, Global Market Analyst at eToro.
A sign of this moment of “pause” that has marked the market with this adjustment is that spot Bitcoin ETFs have also experienced a halt in inflows, while some Digital Asset Treasuries (DAT) bonds are being rebalanced and the supply of stablecoins is decreasing.
In conclusion, eToro experts believe all this indicates a cooling of the market after months of intense activity. “We remain cautious in the short term but confident in the long-term fundamentals,” they conclude in a call for calm.
