Key Points:
The fundamentals of BTC remain intact despite a $1 trillion drop in the total cryptocurrency market capitalization.
Long-term holders and institutional investors continue to absorb the distributed supply of BTC.
Analysts believe this decline is structural, driven by leverage and balance rotation, rather than bearish sentiment.
The crypto market has "erased" over $1.1 trillion in value over the past 41 days, with average daily losses reaching up to $27 billion, according to the Kobeissi Letter. However, analysts argue that this is not a bearish crash, but rather a structural reset driven by leverage, liquidity rotation, and mechanical market flows.
According to the Kobeissi Letter, this decline is a strange anomaly due to the lack of major negative fundamental catalysts. The U.S. political leadership has expressed strong support for crypto, yet BTC has still dropped 25% in a month. The newsletter attributes the decline to institutional outflows that began in late October, followed by a cascade of liquidations driven by leverage. In cases where many traders operate with 20x to 100x leverage, even a 2% fluctuation can trigger massive liquidations, fueling extreme volatility.
Similarly, Coinbase's Head of Institutional Strategy, John D'Agostino, reinforced this view, stating that the decline is mechanical rather than a deterioration of fundamentals, believing that the fundamental conditions of the crypto market have not materially worsened since the end of September. On the contrary, some significant developments have actually strengthened the long-term argument.
In a recent episode of CNBC's "Squawk Box," D'Agostino pointed out that the Czech National Bank recently became the first eurozone central bank to purchase BTC, marking a milestone signal for sovereign adoption. At the same time, companies like Citibank and JPMorgan have begun launching and testing stablecoins to facilitate global customer transactions, which was "unimaginable" in previous cycles.
The Coinbase executive added that crypto ETFs continue to perform strongly, with the Solana (SOL) ETF achieving the best annual ETF issuance, reaffirming that despite price volatility, institutional demand remains robust. From a regulatory perspective, the environment is not worse than before October, as jurisdictions around the world continue to maintain or expand compliance paths for crypto activities.
From a strategic perspective, D'Agostino stated that if investors believe in the fundamental value of BTC, the current environment is akin to buying discounted items in a supermarket.
Glassnode noted that after several weeks of strong selling pressure, the distribution pressure from multiple key holding groups has finally begun to ease, which may be an early sign that the most aggressive supply sell-off has ended, with BTC having retraced 25% from its peak.
Data from CryptoQuant reinforces this narrative, showing that long-term "price insensitive" holders have absorbed 186,000 BTC since October 6, marking the largest increase in the recent cycle. Historically, such surges typically precede significant price increases, but this time the price has declined, creating a rare divergence. Analysts currently believe there are two high-probability outcomes:
A strong rebound as supply dwindles and smart money distributes at higher price levels.
A final washout, clearing the remaining selling pressure, followed by the formation of a more sustainable trend.
In any case, the signal is clear: long-term capital is entering the market, while sentiment has collapsed, and such divergences "never last too long."
Related: Rare Bitcoin (BTC) futures signals may catch traders off guard: Is a bottom forming?
This article does not constitute any investment advice or recommendation. All investment and trading activities carry risks, and readers should conduct their own research before making decisions.
Original: “Coinbase Executive Says $1 Trillion Crypto Market Drawdown Masks Bitcoin’s Strong Fundamentals”
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