Bitcoin once fell below the $81,000 mark, potentially creating the largest monthly decline since 2022

The world's largest cryptocurrency, Bitcoin, is experiencing its worst monthly performance since the industry's collapse in 2022.

On Friday, the price of Bitcoin briefly fell to $80,553, and despite a rebound towards the end of the New York trading session, it is still down more than 30% from its all-time high of $126,000 set in early October. This round of plummeting has brought Bitcoin's decline in November to about 25%, marking its worst performance since 2022.

In June of that year, Bitcoin's monthly decline reached 41%, triggered by the collapse of the TerraUSD stablecoin project, which led to a series of corporate bankruptcies and ultimately the downfall of the FTX exchange.

The second-largest cryptocurrency, Ethereum, also suffered heavy losses on Friday, with a decline of up to 8.9%, falling below $2,700. According to CoinGecko data, the total market capitalization of the entire cryptocurrency market has fallen below $3 trillion for the first time since April.

(The total market capitalization of the cryptocurrency market has fallen below $3 trillion for the first time since April)

Analysts believe that the combination of forced liquidations and structural sell-offs from ETFs has left the market in a fragile state, and institutional investors do not seem to be buying the dip.

Liquidation Wave and Selling Pressure Intensify Market Turmoil

The plunge in Bitcoin began with a large-scale liquidation event on October 10. On that day, $19 billion in leveraged positions were forcibly liquidated, causing the entire cryptocurrency market to evaporate about $1.5 trillion in market value. Since then, the market has failed to recover.

In the past 24 hours, another $2 billion in leveraged positions have been liquidated, according to CoinGlass data. The open interest in perpetual futures has decreased by 35% from the October peak of $94 billion, indicating that investors are significantly reducing their risk exposure.

(The open interest in perpetual futures has decreased by 35% from the October peak of $94 billion)

Chris Newhouse, research director at decentralized finance research firm Ergonia, stated:

The convergence of forced liquidations and structural sell-offs from ETFs has left the market in a particularly fragile state, where any attempts to stabilize the market will immediately face supply pressure from multiple sources.

According to blockchain research firm Arkham Intelligence, a wallet labeled "Owen Gunden," which has held Bitcoin since 2011, began selling off at the end of October, totaling $1.3 billion worth of Bitcoin sold, and cleared its final holdings on Friday.

("Whale" Owen Gunden cleared its final holdings on Friday, having sold a total of $1.3 billion since October) K33 Research Director Vetle Lunde pointed out:

Viewed in isolation, Owen Gunden's sell-off is basically insignificant, equivalent to yesterday's ETF sell-off volume, just spread out over a month's incremental sales. But it does highlight a core theme affecting Bitcoin this year: old players are selling, and at a large scale.

Market liquidity concerns further amplify price volatility. Adam Morgan McCarthy, Head of Research at crypto data provider Kaiko, stated:

As we enter the holiday season this week, liquidity across markets may dry up. If investors continue to cut positions before the holidays, further liquidity depletion could exacerbate market volatility.

Institutional funds withdraw, sentiment indicators hit lows

Institutional investors have not shown a willingness to bottom-fish.

On Thursday, 12 U.S. Bitcoin ETFs saw a net outflow of $903 million, marking the second-largest single-day redemption scale since their launch in January 2024. This stands in stark contrast to the market enthusiasm following Trump's presidential election victory, when investor sentiment indicators reached a high of 94, with a maximum score of 100.

Currently, the crypto investor sentiment index compiled by CoinGlass has fallen to its lowest level since the 2022 crash. This index integrates factors such as volatility, momentum, and demand, and currently shows that traders are in a state of "extreme fear."

Pratik Kala, Portfolio Manager at Australian hedge fund Apollo Crypto, stated:

Overall sentiment is extremely poor. There seems to be passive sellers in the market, and it is still unclear how long this situation will last.

IG Australia analyst Tony Sycamore noted in a report:

The market may also be testing the pain threshold of Strategy company.

This Bitcoin treasury company run by Michael Saylor has seen its mNAV ratio (the ratio of enterprise value to Bitcoin holdings) drop to just above 1.2.

Wall Street Journal previously mentioned that Strategy company may lose its positions in benchmark indices such as the MSCI U.S. Index and Nasdaq 100, with a final decision expected to be announced by January 15 next year.

Companies attempting to replicate Saylor's cryptocurrency hoarding strategy are also under pressure. Companies like Sequans Communications, ETHZilla, and FG Nexus have begun selling portions of their holdings this year for stock buybacks to support their plummeting stock prices