Bitcoin Enters ‘Structural’ Bear Market at $93K Low

Bitcoin’s recent decline has been both severe and perplexing. The cryptocurrency has lost 25% of its value since its early October all-time high, settling at six-month lows around $95,000 after Sunday’s dip to $93,000. What makes this downturn particularly strange, according to analysts at the Kobeissi Letter, is the absence of material bearish developments in the fundamental landscape of cryptocurrency. Just days before the crash, President Trump had declared that making America ‘number one in crypto’ was his top priority, signaling strong political support for the industry.

The broader economic environment also appears supportive rather than restrictive. Inflation in the United States has been gradually declining, the Federal Reserve has cut interest rates again, and Washington and Beijing are reportedly close to a trade deal. These developments create what should be a more bullish landscape than existed in April, making the current price action particularly confounding to traditional market analysts who typically look to macroeconomic catalysts for explanation.

The Kobeissi Letter categorizes the current downturn as ‘structural and mechanical’ rather than fundamentally driven. The analysts trace the beginning of this trend to institutional outflows in mid-to-late October, which became evident through ETF flow data. The situation escalated dramatically in the first week of November when crypto-focused funds experienced $1.2 billion in net outflows, marking a record withdrawal that signaled a significant shift in institutional sentiment.

Where the situation becomes particularly volatile, according to the analysis, is in the excessive levels of leverage used during these institutional outflows. The cryptocurrency market’s reliance on leverage has created a hypersensitive environment where sudden downswings trigger massive liquidations. On October 10th, this dynamic resulted in a -$19.2 billion liquidation spree that produced the first ever $20,000 Bitcoin daily candlestick, demonstrating how leverage can amplify normal market movements into extreme price events.

The data reveals an alarming pattern: three of the last sixteen trading days have seen liquidations skyrocketing to over $1 billion, while daily liquidations exceeding $500 million have become routine. When combined with ‘thin’ trading volume, these conditions create the violent price swings in either direction that have characterized recent market behavior, explaining how Bitcoin can experience such dramatic moves without corresponding fundamental news.

The impact of these structural forces on market psychology has been profound. The Fear and Greed Index has plunged to its lowest levels since February, despite Bitcoin still trading 25% above its April bottom. This disconnect between price levels and sentiment indicators underscores how leverage is amplifying shifts in investor psychology, creating a feedback loop where fear begets more selling, which triggers more liquidations, which fuels more fear.

Despite the bleak short-term picture, the Kobeissi Letter team concludes that the fundamental value of the cryptocurrency market has actually improved. They predict that the bottom is near as these structural ‘wrinkles will work their way out’ through the market’s natural efficiency. This perspective suggests that once the excess leverage is cleared from the system and institutional outflows stabilize, Bitcoin and the broader crypto market could find a more solid foundation for recovery.

The current environment represents a critical test for cryptocurrency markets as they mature. The emergence of this ‘structural’ bear market highlights how institutional participation and sophisticated financial instruments like leverage have changed market dynamics, creating new types of cycles that operate independently of traditional fundamental analysis. For investors, understanding these mechanical forces may become as important as tracking regulatory developments or technological advancements in the space.