Bitcoin remains weak as cryptocurrency market stabilizes following a challenging week.
Bitcoin has started the week facing challenges as a result of a prolonged selloff that may lead to it experiencing its worst month since 2022. After making some recovery progress over the weekend, the original cryptocurrency, Bitcoin, dropped by 3.1 percent, falling below the US$86,000 mark on November 25. Although the current value is higher than the low it experienced on November 21, traders are feeling apprehensive about the situation. Despite significant institutional adoption and policy advancements championed by US President Donald Trump, the broader cryptocurrency market is in a slump.
Caroline Mauron, co-founder of Orbit Markets, observed that the market’s current state suggests slight weakness in trading activities with fairly modest movements that are within normal trading variances. It is anticipated that Bitcoin will continue to trade within the US$80,000 to US$90,000 range. Traders are pursuing downside protection at lower levels by displaying a preference for put options at the US$80,000 strike over the US$85,000 strike. Notably, these have become the most sought-after contracts on the crypto exchange Deribit, which is owned by Coinbase.
Analysis of the Bitcoin funding rate, a fundamental measure of market sentiment favoring cryptocurrencies, indicates a recent shift to negative figures in the perpetual futures market as reported by CryptoQuant. This suggests that there is a greater demand for bearish wagers than bullish positions. This negative trend in the Bitcoin funding rate is a significant development given that it had been consistently positive despite recent market turbulence. This shift highlights a growing pessimism among traders about digital assets, escalating the number of traders betting against Bitcoin, the largest cryptocurrency in the market.
The current slump in digital assets, especially Bitcoin, could make November the worst month for the cryptocurrency since the collapse of several corporations back in 2022, which culminated in the failure of the FTX exchange under Sam Bankman-Fried. Analysts like Rachael Lucas from BTC Markets pinpoint US$85,200 as a crucial support level that requires monitoring following the breakdown observed last week. While market conditions are currently influenced more by technical and macroeconomic factors rather than fundamentals, Lucas suggests that these liquidation flurries often precede market rebounds if no new unforeseen events occur.
Despite a slight improvement over the weekend, Bitcoin remains at about a 30 percent deficit from its all-time high achieved in October. It is yet uncertain how long the recovery trend will continue without stronger tailwinds. Open interest in perpetual futures remains 36 percent below its peak in October of US$94 billion. Moreover, investors have withdrawn over US$3.5 billion from US-listed Bitcoin exchange-traded funds, which have traditionally been influential in shaping the token’s price trajectory.
Considering the recent downward trend, it is evident that both retail and institutional investors will likely face challenges due to the heavy losses incurred by short-term holders of Bitcoin. These wallet holders, with Bitcoin holdings of less than 155 days, are currently facing daily losses of around US$630 million, the highest since the market crash experienced in June 2022. Analysts from Glassnode emphasize the necessity for either a resurgence in demand to absorb distressed sellers or a prolonged accumulation phase to restore market equilibrium.
