Bitcoin Crash: Market Warning from NYDIG

Recently, the drop in Bitcoin prices to $84,000 has made the situation in the markets concerning. NYDIG Research Director Greg Cipolaro states that this decline in Bitcoin is no longer a matter of sentiment but is driven by mechanical factors.

While a rise is expected in 2024 and 2025, Cipolaro states that these forces are currently working in the opposite direction. Notably, it was significant that spot Bitcoin ETFs carried billions of dollars to the market in the first half, creating substantial demand. However, according to Cipolaro's report, five-day flows now show a net negative picture. The products that reached a record high of $3.55 billion in outflows in November are putting serious selling pressure on the market.

SoSoValue data reveals that this outflow is nearly approaching the record of $3.56 billion from February. There is also a slowdown in the supply of stablecoins, marking a decline for the first time in months. It is reported that the supply of algorithmic USDE has halved following the liquidation shock on October 10. This situation indicates that money has completely exited the market. For example, USDE, which dropped to $0.65 on Binance, highlights how aggressively capital has been pulled from the system.

A similar situation is occurring in terms of institutional demand. The report indicates that some companies have shifted from purchasing Bitcoin to asset sales or stock buybacks due to the loss of premiums in their treasury strategies. For instance, Sequans sold Bitcoin this month to reduce its debt burden. However, Cipolaro notes that there is no financial stress among DAT companies and that debt levels are low.

Even large purchases like those from El Salvador did not halt the price decline. This situation illustrates how strong the market transformation is. Cipolaro states that all the mechanical breakdowns experienced are a reflection of the $19 billion liquidation chain on October 10. While investor hopes remain for the long term, he expresses that cyclical pressures will be decisive in the near term. He warns investors, saying "Hope for the best, but prepare for the worst."