📉 The Crypto Collapse: A Mechanical Bear Market
On October 6th, just 45 days ago, Bitcoin hit a staggering record high of $126,272, commanding a market capitalization of $2.5 trillion.
Then, something "mechanical" appears to have shifted.
The turning point seemed to arrive around October 10th, following President Trump's threat of 100% tariffs on China. Not only did this event trigger a record -$19.2 billion liquidation event, but Bitcoin never truly recovered its footing.
Even when the US and China reached a trade deal on October 30th, the liquidation pressures on the crypto market only worsened.
Since November 10th, the situation has become more severe. Bitcoin has moved in a literal straight line lower, with average daily liquidations consistently nearing $1 billion.
Crucially, throughout the course of this 45-day bear market, crypto has seen little to no bearish fundamental developments. The underlying technology and adoption narrative remain largely intact.
We continue to believe this is a mechanical bear market driven primarily by:
1. Excessive Levels of Leverage built up during the previous rally.
2. Sporadic Liquidations that cascade due to high leverage, forcing the sale of assets regardless of their fundamental value.
The market is efficient. It is currently "ironing itself out" by aggressively flushing out this built-up leverage.
