Amid the lingering shadow of October's historic deleveraging event, the cryptocurrency market is facing renewed selling pressure. A key indicator suggests weakening demand from large institutional investors, further fueling market caution.
On Monday, the crypto market remained under pressure, with Bitcoin dropping below $107,000. The broader altcoin market performed even weaker, with some tokens falling back to their lows during October's flash crash, when billions in leveraged positions were liquidated.
A concerning signal emerged as Charles Edwards, founder of Capriole Investments, noted that Bitcoin's institutional demand has fallen below the rate of new coin issuance for the first time in seven months. This shift suggests large buyers may be retreating, reinforcing a risk-off sentiment across the crypto market.
**Cautious Sentiment as Institutional Demand Cools** Bitcoin fell as much as 4.3% to around $105,300 on Monday. While it remains up about 14% since December, its recent performance has been notably sluggish. Meanwhile, the MarketVector index tracking the performance of the bottom 50 of the top 100 digital assets fell for a third consecutive session, plunging as much as 8.8% and down roughly 60% year-to-date.
Market participants say the aftermath of October's violent shakeout—which wiped out about $19 billion in long positions—continues to weigh on sentiment. Jordi Alexander, CEO of crypto trading and market-making firm Selini Capital, described the market as being in a "hangover phase" following October's liquidation shock. He believes rebuilding the destroyed capital base will take time, leaving investors cautious.
"Markets must first prove a convincing price bottom is forming before attempting another breakout," Alexander added. Until clear signs of price support emerge, investors are unlikely to re-enter aggressively.
Beyond fragile sentiment, a key technical indicator has flashed a warning. Capriole's Edwards highlighted that institutional Bitcoin demand has slowed to below the rate of new supply—the first such occurrence in seven months. This suggests one of the key drivers behind the market's earlier rally may be fading.
**Alternative Sources of Selling Pressure: Profit-Taking and Dormant Bitcoin Awakens** Not all analysts attribute the current downturn solely to October's market shock.
Matthew Kimmell, a digital asset analyst at CoinShares, called the pullback "somewhat puzzling." While acknowledging that the market is "still experiencing some reverberations from the liquidation event," he pointed to other contributing factors.
Kimmell noted that blockchain data shows previously inactive Bitcoin wallets have been reactivated. "These tokens have started moving, likely re-entering the market and adding selling pressure as investors take profits," he said. "This is something I'm monitoring closely."
Jake Hanley, managing director at Teucrium ETFs, also attributed the price decline to profit-taking. He observed a diverging technical landscape: "Since summer, prices led by Bitcoin have been trending lower, while XRP has also clearly weakened since mid-summer. The price action itself tells you people are cashing out gains."