[BENGALURU] They bought in haste – will they repent at leisure?
A stampede of new investors hoovered up Bitcoin at lofty prices as crypto fever ran high after Donald Trump swept to victory in the November US presidential election.
Now, barely six weeks after Trump was inaugurated, Bitcoin has sunk into a bear market, drained by a sell-off in global stocks. Just weeks after hitting a six-figure all-time high, the largest cryptocurrency is now trading at around US$80,000, down nearly a quarter from its January peak.
A wave of investors that entered the market chasing Bitcoin’s rally past US$100,000, especially those using borrowed money, are feeling the pinch from its decline.
At least 20 million new Bitcoin addresses – about 1.5 per cent of all Bitcoin addresses in existence – have been created in the past three months, according to crypto data and analytics firm Glassnode.
The ratio between the prices at which new Bitcoin is being bought and sold, known as the spent output profit ratio, has meanwhile dipped to 0.95, its lowest level in over a year and negative for the first time since October, according to estimates from crypto exchange Bitfinex.
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“This suggests that recent buyers are locking in significant losses, reinforcing the exceptionally challenging conditions for newer investors,” analysts at Bitfinex said.
The world’s largest cryptocurrency hit a record high of US$109,071 in January, but has since lost most of the gains racked up since the American election, as concerns about US tariff policy, the health of the world’s largest economy and a tech sell-off sap risk appetite.
“I was surprised to see Bitcoin at US$80,000 and it looks like the bloodletting hasn’t ended yet,” said Kevin Dede, analyst at investment bank HC Wainwright.
Even US President Donald Trump’s executive order to create a Bitcoin strategic reserve and an additional stockpile of other crypto tokens only gave the crypto market a temporary boost.
“This corrective sell-off has caught many by surprise,” said John Glover, chief investment officer of crypto lending platform Ledn, adding the asset could find support at the US$73,500 level.
Traders feel the pain
Traders with leveraged positions are feeling the pain, according to Bitfinex analysts who said that this group’s realised overall losses is hovering above US$800 million per day, with Feb 28 and March four seeing some of the biggest single-day losses.
Meanwhile, investment products tracking digital assets saw outflows for the fourth straight week, according to CoinShares data. Total assets under management in these products have dipped around US$4.75 billion to US$142 billion. That’s the lowest since mid-November 2024 after the US election.
US spot Bitcoin ETFs saw outflows of around US$1.1 billion in outflows on Feb 25, the biggest daily outflow since their launch in January last year, according to JPMorgan.
While past sell-offs in crypto markets are often followed by some amount of calm as the market finds its footing, Bitcoin may be at the mercy of broader markets for the time being.
The implied or future Bitcoin volatility priced into derivatives has spiked to 69 per cent in the last 24 hours, while the second-largest token ether’s implied volatility has increased from 65 per cent to 90 per cent since Monday, meaning investors expect more choppiness ahead, according to Amberdata.
“The last two weeks have 100 per cent been driven by the equity market tantrum,” said Jeff Dorman, chief investment officer at asset manager Arca in a note. “This likely plays out similar to what we saw in late 2018, which was nothing more than a short-term hiccup on the way to further highs.” REUTERS
