Bitcoin heads for fourth annual loss as market fatigue weighs

Onchain data reveals that Bitcoin is headed for its fourth consecutive annual loss in history, marking the first time the decline is not due to an industry meltdown or scandal. The sharp selloff on Monday during the New York session led to a 3.7% drop in Bitcoin prices, bringing the total decline to 7% YTD. 

Data retrieved from major crypto data trackers and aggregators suggests that the latest decline is a much milder correction compared to the previous three drawdown years. The decline is also occurring against a different backdrop, as institutional adoption has expanded and regulation has matured since the last major crypto crash in 2022. Bitcoin’s first three annual declines since its debut on exchanges in 2010 were marked by events that temporarily shattered the market’s confidence. 

Meanwhile, Bitcoin has dropped sharply since its early October ATH of $126,000 despite support from influential figures like U.S. President Donald Trump. Data from SoSoValue shows that investors are ditching BTC ETFs, and the low volumes suggest a lack of appetite for betting on a rebound. Even massive purchases by dominant BTC holders, such as Michael Saylor’s Strategy, have not been enough to sway investor sentiment. 

Kala blames it on a lack of follow-through despite positive catalysts

Pratik Kala, a portfolio manager at Apollo Crypto, notes a surprising lack of follow-through across the crypto industry, despite numerous positive catalysts. Bitcoin has decoupled from stocks during this bear market as the S&P 500 rose 16% YTD earlier this month. Tech stocks, which tend to move in sync with Bitcoin, are also performing even better as the token’s value plummets. 

The 2014 hack and subsequent collapse of Mt. Gox reportedly exposed huge gaps in crypto’s infrastructure and showed early traders that their funds were still at risk even on centralized platforms. Bitcoin dropped nearly 58% that year.

Meanwhile, a bubble in the so-called initial coin offerings (ICOs) burst four years later after authorities cracked down on crypto, sending Bitcoin and other tokens spiraling downward. The 74% decline of 2018 still holds the record for the most significant drop in BTC prices ever.  

The 2022 meltdown was probably the most significant because it led to the closure of several major firms like Sam Bankman-Fried’s FTX. It also sparked a broad crackdown by the Biden administration. 

Seiler says the current BTC decline is more than a price correction

Maxime Seiler, the chief executive officer at STS Digital, claims that this bear BTC cycle could end up being more of a time correction than a sharp price correction. He believes this is just a long consolidation as BTC trades between $70,000 and $100,000. 

However, realized losses for short-term BTC holders are reportedly the highest since the FTX collapse. The brittleness of Bitcoin’s rally was evident on October 10, when nearly $19 billion of leveraged wagers were wiped out, sending crypto markets into a tailspin that exposed the vulnerabilities piling up beneath the surface. Meanwhile, it looked like nothing could stop Bitcoin’s rise until October’s peak.

On the other hand, several market metrics currently suggest that traders are choosing to remain on the fence for now, or at least until Bitcoin’s volatility reduces. Data retrieved from SoSoValue confirms that investors have withdrawn over $5.2 billion from U.S.-listed spot Bitcoin ETFs since October 10. Market depth has also dropped about 30% from the year’s high, according to data from researcher Kaiko.

Kala observed that BTC prices have failed to follow through, despite the industry receiving everything it had asked for on the regulatory front, including staking on ETFs. The Apollo Crypto portfolio manager noted that the selling by old whales has dampened the coin’s momentum.

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