Author: The Kobeissi Letter
Translated by: Tim, PANews
In the past 41 days, the total market value of cryptocurrencies has evaporated by $1.1 trillion, equivalent to an average daily loss of $27 billion.
After the major liquidation on October 11, the total market value of cryptocurrencies has currently dropped by about 10% compared to before.
I believe this is a structural market adjustment, and this post will explain the reasons in detail.
This decline is quite unusual, because from the perspective of the fundamentals of the crypto market, there haven't been many substantial bearish factors.
Just a few days ago, President Trump stated that making the U.S. a "leader in the crypto space" is a top priority of his work.
However, Bitcoin has dropped 25% in a month.
This seems to be a structural decline, which all began with the outflow of institutional funds in mid to late October.
In the first week of November, crypto funds experienced an outflow of $1.2 billion. The concerning issue is that the outflow of funds occurred when leverage levels were excessively high.
The use of leverage in the crypto market is quite aggressive. It is not uncommon for speculators to hold leverage multiples of 20x, 50x, or even 100x.
As shown in the figure below, with 100x leverage, a mere 2% price fluctuation can lead to liquidation. When millions of traders use leverage simultaneously, it can trigger a domino effect.
Therefore, when the crypto market suddenly plummets, the scale of liquidations can surge.
As happened on October 11, a liquidation frenzy of $19.2 billion led to Bitcoin experiencing its first daily drop of $20,000.
Excessively high leverage levels have made the market extraordinarily sensitive.
In just the past 16 days, there have been 3 days where the single-day liquidation amount exceeded $1 billion.
A single-day liquidation amount exceeding $500 million has become the norm.
Especially during periods of low trading volume, this can lead to extreme volatility in the crypto market. Moreover, this volatility is bidirectional.
This also explains the sudden shift in market sentiment. The crypto market's fear and greed index has officially dropped to 10, indicating "extreme fear."
The current index is now at the same level as the historical low in February 2025. Although Bitcoin has risen 25% since its low in April, leverage is amplifying investors' emotional fluctuations.
Are you still reluctant to believe all of this?
Take a look at the comparison chart of Bitcoin and gold since the major liquidation on October 11. Over the past 12 months, gold and Bitcoin have shown a high correlation as safe-haven assets. However, since early October, gold has outperformed Bitcoin by 25 percentage points.
The downturn in the crypto market is even more pronounced in assets other than Bitcoin. For example, Ethereum has currently seen a cumulative decline of -8.5% this year. Since October 6, Ethereum has dropped significantly by 35%.
Despite a broad rise in various risk assets, Ethereum's decline has far exceeded typical bear market levels.
When you take a step back, the crypto market seems to be in a "structural" bear market. Although the fundamentals of the crypto market have improved, the factors influencing prices are changing. As with any efficient market, this issue will resolve itself.
Therefore, we believe the market bottom is near.
Beyond the crypto market, other assets are also presenting entry opportunities. The macroeconomic landscape is shifting, and current stocks, commodities, bonds, and cryptocurrencies all hold investment value.
The macro reality is that the global M2 money supply has reached a historic high of $137 trillion. Japan is brewing an economic stimulus plan of over $110 billion, and Trump's $2,000 tariff bonus is also about to be distributed. For cryptocurrencies, this decline is merely a growing pain in the upward process.
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