It’s been a tough month for bitcoin investors.
The OG cryptocurrency officially entered a bear market at the beginning of this month, with the token’s price down 22% since reaching a peak of around $126,000 in early October.
After being up as much as 35% year-to-date, the latest tumble has whittled that gain down to less than 4% on Friday.
The sell-off accelerated this week. Bitcoin dropped as low as $94,700 on Friday, the lowest the crypto has traded in about six months.
Here’s what’s driving the sell-off:
Tech tumble
ANGELA WEISS/AFP via Getty Images
Bitcoin has been hurt amid a broader sell-off in risk assets, with tech stocks in particular getting hit hard as investors fret over high valuations.
Outflows from spot bitcoin ETFs hit $866.7 million on Thursday, according to data from CoinGlass, the worst outflow bitcoin funds have seen since early August.
“In some ways, Bitcoin was a leading indicator for risk,” David Nicholas, the CEO of XFUNDS, wrote in a note this week, pointing to recent concerns among investors about valuations in the stock market. “I think it’s the perfect recipe for Bitcoin price weakness,” he added.
“The broad sell-off in technology stocks has been a key factor behind the deterioration in risk appetite,” Antonio Gi Giacomo, a senior market analyst at XS.com, wrote in a recent client note.
Liquidity
Bitcoin’s liquidity has also dropped off over the last month, a possible reason the crypto’s price has seen more volatility.
Bitcoin’s market depth, a measure of how resistant its price is to volatility stemming from large trades, dropped from around $766 million in early October $535.2 million as of this week, according to the crypto analytics firm Kaiko.
Rumors swirling around Michael Saylor
David Becker for BI
The sell-off picked up steam on Friday as Michael Saylor, the founder of Strategy and one of bitcoin’s biggest cheerleaders over the years, fended off online rumors that his crypto treasury dumped some of its bitcoin holdings.
Akrham Intel, a crypto intelligence firm, estimated that Strategy had around 437,000 bitcoin tokens as of Friday, down from a peak of around 484,000 tokens earlier this month. Previously, the firm said it believed it had identified around 97% of Strategy’s total bitcoin holdings.
Strategy said it had had 641,692 bitcoin tokens on its website as of Friday. The company did not immediately respond to a request for comment from Business Insider.
Strategy is the largest corporate holder of bitcoin, and any selling would be taken as a bearish signal by the market, given Saylor’s enduring bullishness and insistence that the company would only ever be a buyer.
A worrying sign flagged by bitcoin watchers on social media is Strategy’s net asset value premium, which refers to the value of its bitcoin holdings versus its market capitalization. The premium fell below 1x this week, meaning its premium over the value of its bitcoin holdings has been erased for now. Strategy’s market cap was about $59 billion on Friday, compared to $63 billion for the value of it bitcoin.
It’s still the largest public corporate owner of bitcoin, according to a separate Arkham report released this week.
But on his X account, Saylor told his followers that the firm was actually “₿uying” more bitcoin, and posted an illustration of himself with the text: “HODL,” an acronym crypto investors use in periods of volatility that stands for Hold On for Dear Life.
He reiterated that in an interview on CNBC on Friday, saying that Strategy was accelerating its purchases and would release its next report on its bitcoin buying on Monday.
“I think the volatility comes with the territory,” Saylor said of the latest sell-off.