Bitcoin slumps nearly 20% from all-time high as strategist warns 'we could correct quite a bit more'
Bitcoin (BTC-USD) had a rough week, with the token briefly slipping below $100,000, its lowest level in six months.
On Friday, the world's largest cryptocurrency was sitting as much as 20% off its all-time high of above $126,000 notched on Oct. 6.
Wall Street has attributed the slide to early adopters offloading their large holdings. Since late June, net sales from long-term holders have exceeded 1 million bitcoin, according to research from Compass Point analyst Ed Engel.
A massive liquidation of leveraged crypto positions on Oct. 10 also weighed on the market, with bitcoin struggling to find a footing after breaking below support levels of $117,000 and then $112,000.
“We haven’t really reclaimed this level since then, and I think that’s a sign we are, unfortunately, in a bear market,” Markus Thielen, founder and CEO of Singapore-based 10X Research told Yahoo Finance on Friday morning.
Thielen’s firm, which last month predicted bitcoin would fall to $100,000, now expects the market may still be “a few weeks away” from reaching a buyable bottom.
“I think there’s this brief risk where we could correct quite a bit more,” he added
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10X Research said the marginal buyer is stepping back as capital that chased higher prices has either been flushed out or is no longer bidding with conviction. Fund managers with long exposure through exchange-traded funds may also be forced to trim positions as underlying asset prices decline.
The dollar’s recent bottom could also pose a challenge for crypto markets. A continued rally in the greenback may be a potential headwind for bitcoin.
"There's this air pocket below $93,000, and there is not much support," Thielen said. "It could be that there is going to be some liquidation that brings us to potentially the $70,000 level."
"Historically these OG investors (early adopters), they tend to sell at the top of the cycle, only to buy back in later again, and I think that's probably what we're going to see here," he added.
Bullish catalysts that could lift prices include a potential Federal Reserve rate cut in December and the prospect of more dovish leadership at the central bank, with Chair Jerome Powell’s term set to expire in May.
The reopening of the US government could also provide a tailwind for crypto, as some strategists expect additional liquidity from government spending to flow back into markets and support prices.
"The shutdown is stifling liquidity conditions and it is furthering growth concerns," Sean Farrell, head of digital assets at Fundstrat, said in a Thursday video to clients.
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