Continuously being bloodied! The gains in the first ten months of this year were wiped out in just one month in the crypto circle

The cryptocurrency market has almost erased all the gains accumulated in the first ten months of this year in just over a month.

After a week of sharp declines, Bitcoin's price stabilized and rebounded at the end of trading on Friday, rising above $103,000, but still down about 18% from the record high of $120,000 set on October 6.

(Bitcoin rebounded after falling below $100,000 twice this week)

According to CoinGecko data, the total market capitalization of cryptocurrencies reached nearly $4.4 trillion on October 6, but has since plummeted about 20% in just over a month, leaving the entire asset class with a year-to-date gain of only 2.5%.

The weakness in cryptocurrencies is causing some anxiety on Wall Street, as Bitcoin is now seen as a leading indicator for the highly volatile U.S. stock market. The once-reliable "buy the dip" strategy seems to be failing, further exacerbating the market's wait-and-see sentiment.

Speculative Frenzy Cools, AI and Crypto Assets Adjust in Sync

This round of cryptocurrency crashes coincided almost simultaneously with concerns over the valuations of AI tech stocks, indicating that risk appetite in the high-risk asset space is cooling.

Wall Street Insights mentioned that U.S. tech stocks experienced their worst week since April, dragged down by worries about the actual returns of AI and excessive valuations.

Peter Atwater, a behavioral economics professor at the College of William & Mary, stated that one of the biggest blows to speculative sentiment was the 8% drop in the stock price of AI concept stock Palantir the day after it reported better-than-expected earnings. He pointed out:

Palantir, AI, and cryptocurrencies are in the same realm, all favorites of retail investors, so this is a collective phenomenon.

Meme stocks, recent IPOs, and unprofitable tech stocks, which have been highly favored by retail investors, have all retreated from recent highs. These indices have all fallen more than 10% from recent peaks set in the past month or two.

(Meme stock index has fallen over 10% from its peak)

Jeff Mei, the Chief Operating Officer of cryptocurrency exchange BTSE, warned that concerns over the high valuations of AI stocks are part of the reason for the decline in digital assets, stating:

If we see a sell-off in AI and tech stocks, Bitcoin is likely to fall below the $100,000 mark completely, and other alternative coins (altcoins) may experience even larger declines.

"Buy the Dip" Strategy Fails, Investor Confidence Shaken

As market sentiment reverses, investor behavior has also changed significantly, with the once-strong "buy the dip" mentality facing severe tests According to reports, Mark Hackett, Chief Market Strategist at Nationwide, stated:

Until a few weeks ago, any reasonable pullback in Bitcoin or other hot tech stocks would have been aggressively bought, but we are not seeing that now.

He added, it is still too early to determine whether there has been a fundamental shift in investor behavior, but he is closely monitoring this trend.

The flow of funds data corroborates this cautious sentiment. According to Bloomberg, in just the past week, investors withdrew over $700 million from digital asset ETFs, with nearly $600 million flowing out of BlackRock's Bitcoin fund.

Meanwhile, the performance of alternative coins has been noticeably worse. Augustine Fan, a partner at SignalPlus, stated:

Aside from Bitcoin and Ethereum, most areas of the crypto market have been on the defensive for months, with almost no new funds flowing into alternative tokens or DeFi projects.

Ilan Solot, an analyst at Marex, wrote in a report:

There is simply not enough new capital to offset the exit of local investors. For the upward trend to resume, 'whales' need to stop selling.

A few weeks ago, a leveraged position worth about $19 billion was suddenly liquidated, and the market has yet to recover from that shock.

Market Canary? Bitcoin is seen as a leading indicator of risk appetite

In the eyes of Wall Street analysts, Bitcoin's role is increasingly resembling that of a "canary in the coal mine," with its price fluctuations viewed as a leading indicator for high-volatility tech stocks and retail liquidity.

Eric Balchunas of Bloomberg Industry Research described:

Bitcoin has a knack for sniffing out problems ahead of time. It trades around the clock, like a 711 convenience store, giving it more opportunities to serve as a price discovery tool.

Now, this leading indicator has sent out a worrying signal. According to a report from Citigroup, the number of "whale" investors holding large positions for the long term is declining.

In the past, this group tended to hold their positions even during the most severe downturns. Their wavering now exacerbates concerns about tightening liquidity in the market.

Louis LaValle, CEO of crypto investment firm Frontier Investments, warned:

Bitcoin breaking below the important support level of $100,000 could signal that the sell-off is not over, and it may still drop below $70,000 in the near future.

Risk Warning and Disclaimer

The market is risky, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at their own risk