Summary

The cryptocurrency market has experienced a significant decline recently, losing $1.1 trillion in total market capitalization over 41 days. Bitcoin fell 25% in a month, and Ethereum has dropped 35% since early October. This downturn is analyzed as a structural adjustment, primarily caused by excessive market leverage which amplified price volatility and triggered massive liquidations, such as the single-day liquidation of $19.2 billion on October 11th. Although no substantial bearish factors have emerged in market fundamentals, and President Trump has emphasized making the US a leader in crypto, the leverage-driven liquidations exacerbated market volatility and investor fear. The Fear & Greed Index has fallen to "Extreme Fear" levels. Analysis suggests the market may be nearing a bottom. With macroeconomic factors like increasing global money supply and economic stimulus plans being implemented, cryptocurrencies and other asset classes may present investment opportunities.

(Author: The Kobeissi Letter | Compiled by: Tim, PANews)

The total cryptocurrency market capitalization has shed $1.1 trillion in the past 41 days, equivalent to a daily loss of $27 billion. Following the major liquidation event on October 11th, the total crypto market cap is now down approximately 10% from its previous level.

We believe this is a structural market adjustment. This post will explain why in detail.

A Peculiar Decline

This decline is peculiar because, from a fundamental perspective, few substantial bearish factors have emerged for the crypto market. Just a few days ago, President Trump stated that making the US the "leader in the crypto space" was a top priority. Yet, Bitcoin is down 25% in a month.

Structural Downturn Driven by Leverage

This appears to be a structural decline, starting with institutional outflows in mid-to-late October. In the first week of November, crypto funds saw outflows of $1.2 billion. The critical issue lies in the high leverage levels present during these outflows.

Leverage usage in the crypto market is aggressive. It's not uncommon for speculators to employ leverage as high as 20x, 50x, or even 100x. As the chart below shows, with 100x leverage, just a 2% price move can trigger liquidation. When millions of traders use leverage simultaneously, it creates a domino effect.

Leverage Fuels Volatility and Liquidations

Consequently, when the crypto market suddenly plunges, the scale of liquidations surges. As happened on October 11th, a frenzy of $19.2 billion in liquidations caused Bitcoin to post its first daily candlestick with a $20,000 drop. Excessive leverage has made the market exceptionally sensitive.

Just in the past 16 days, there have been three days with single-day liquidation volumes exceeding $1 billion. Days with over $500 million in liquidations have become the norm. This leads to violent swings in the crypto market, especially during periods of low trading volume. And this volatility works both ways.

Impact on Market Sentiment

This also explains the sudden shift in market sentiment. The Crypto Fear & Greed Index has officially dropped to 10, indicating "Extreme Fear." The current reading matches the historical low from February 2025. Although Bitcoin is still up 25% since its April low, leverage is amplifying investor sentiment swings.

Bitcoin Diverges from Gold

Still not convinced? Look at the performance chart of Bitcoin versus Gold since the major liquidation on October 11th. For over 12 months, Gold and Bitcoin, as perceived safe-haven assets, were highly correlated. But since early October, Gold has outperformed Bitcoin by 25 percentage points.

Broader Market Weakness

The market's weakness is even more apparent beyond Bitcoin. Take Ethereum as an example; it is now down -8.5% year-to-date. Since October 6th, Ethereum has plummeted 35%. Despite broad rallies across various risk assets, Ethereum's decline has far exceeded typical bear market levels.

The Bottom May Be Near

When you take a step back, the crypto market seems to be in a "structural" bear phase. Although crypto fundamentals have improved, the factors influencing prices are changing. As in any efficient market, this problem will correct itself. Therefore, we believe the market bottom is approaching.

Macro Tailwinds and Opportunity

Beyond crypto, other assets are also presenting entry opportunities. The macroeconomic landscape is shifting. Current stocks, commodities, bonds, and cryptocurrencies all hold investment value. The macro reality is that the global M2 money supply has reached a record high of $137 trillion. Japan is brewing an economic stimulus plan of over $110 billion, and Trump's $2000 tariff红利 is on the horizon. For cryptocurrencies, this decline is merely a temporary setback within a larger upward trend.

Summary

The cryptocurrency market has experienced a significant decline recently, losing $1.1 trillion in total market capitalization over 41 days. Bitcoin fell 25% in a month, and Ethereum has dropped 35% since early October. This downturn is analyzed as a structural adjustment, primarily caused by excessive market leverage which amplified price volatility and triggered massive liquidations, such as the single-day liquidation of $19.2 billion on October 11th. Although no substantial bearish factors have emerged in market fundamentals, and President Trump has emphasized making the US a leader in crypto, the leverage-driven liquidations exacerbated market volatility and investor fear. The Fear & Greed Index has fallen to "Extreme Fear" levels. Analysis suggests the market may be nearing a bottom. With macroeconomic factors like increasing global money supply and economic stimulus plans being implemented, cryptocurrencies and other asset classes may present investment opportunities.

(Author: The Kobeissi Letter | Compiled by: Tim, PANews)

The total cryptocurrency market capitalization has shed $1.1 trillion in the past 41 days, equivalent to a daily loss of $27 billion. Following the major liquidation event on October 11th, the total crypto market cap is now down approximately 10% from its previous level.

We believe this is a structural market adjustment. This post will explain why in detail.

A Peculiar Decline

This decline is peculiar because, from a fundamental perspective, few substantial bearish factors have emerged for the crypto market. Just a few days ago, President Trump stated that making the US the "leader in the crypto space" was a top priority. Yet, Bitcoin is down 25% in a month.

Structural Downturn Driven by Leverage

This appears to be a structural decline, starting with institutional outflows in mid-to-late October. In the first week of November, crypto funds saw outflows of $1.2 billion. The critical issue lies in the high leverage levels present during these outflows.

Leverage usage in the crypto market is aggressive. It's not uncommon for speculators to employ leverage as high as 20x, 50x, or even 100x. As the chart below shows, with 100x leverage, just a 2% price move can trigger liquidation. When millions of traders use leverage simultaneously, it creates a domino effect.

Leverage Fuels Volatility and Liquidations

Consequently, when the crypto market suddenly plunges, the scale of liquidations surges. As happened on October 11th, a frenzy of $19.2 billion in liquidations caused Bitcoin to post its first daily candlestick with a $20,000 drop. Excessive leverage has made the market exceptionally sensitive.

Just in the past 16 days, there have been three days with single-day liquidation volumes exceeding $1 billion. Days with over $500 million in liquidations have become the norm. This leads to violent swings in the crypto market, especially during periods of low trading volume. And this volatility works both ways.

Impact on Market Sentiment

This also explains the sudden shift in market sentiment. The Crypto Fear & Greed Index has officially dropped to 10, indicating "Extreme Fear." The current reading matches the historical low from February 2025. Although Bitcoin is still up 25% since its April low, leverage is amplifying investor sentiment swings.

Bitcoin Diverges from Gold

Still not convinced? Look at the performance chart of Bitcoin versus Gold since the major liquidation on October 11th. For over 12 months, Gold and Bitcoin, as perceived safe-haven assets, were highly correlated. But since early October, Gold has outperformed Bitcoin by 25 percentage points.

Broader Market Weakness

The market's weakness is even more apparent beyond Bitcoin. Take Ethereum as an example; it is now down -8.5% year-to-date. Since October 6th, Ethereum has plummeted 35%. Despite broad rallies across various risk assets, Ethereum's decline has far exceeded typical bear market levels.

The Bottom May Be Near

When you take a step back, the crypto market seems to be in a "structural" bear phase. Although crypto fundamentals have improved, the factors influencing prices are changing. As in any efficient market, this problem will correct itself. Therefore, we believe the market bottom is approaching.

Macro Tailwinds and Opportunity

Beyond crypto, other assets are also presenting entry opportunities. The macroeconomic landscape is shifting. Current stocks, commodities, bonds, and cryptocurrencies all hold investment value. The macro reality is that the global M2 money supply has reached a record high of $137 trillion. Japan is brewing an economic stimulus plan of over $110 billion, and Trump's $2000 tariff红利 is on the horizon. For cryptocurrencies, this decline is merely a temporary setback within a larger upward trend.