The price of Bitcoin (BTC) accelerated its sell-off on November 21 to hit a new yearly low of $15,654.
The move follows a market-wide decline that was catalyzed by investors running for the hills out of fear that the FTX-induced contagion would infect every corner of the crypto sector.
Stocks also closed the day in the red, with the tech-heavy Nasdaq down 1% and the S&P 500 losing 0.42% on investor concerns about rising interest rates.
Data from Coinglass shows that more than $100 million in leveraged longs were liquidated on November 20 and 21, as investors fear an accelerated selloff if Digital Currency Group (DCG) and BlockFi fail to secure funding and are forced to declare bankruptcy.
Some analysts are betting on Bitcoin price falling below $14,000, which would put another 10,000 BTC at risk for liquidation.
Let’s explore the main reasons why the price of Bitcoin is falling today.
On-chain data cites historical “peak realized losses”
Bitcoin price is reacting to the stress placed on the market by the widespread contagion of FTX, reaching a yearly low after a period where many thought the bottom of a bear market had been found.
Data from Glassnode shows $1.45 billion in realized losses for the week of November 12, ranking as the fourth largest in history.
According to Glassnode:
“A competantly small $83M in realized profits occurred, suggesting that the vast majority of spent volume is currently being sourced from current cycle investors”
Rising interest rates in the US and abroad are weighing on Bitcoin price
Based on the Consumer Price Index Report, inflation in the United States increased by 0.6% in September compared to the previous month.
The Consumer Price Index report – the most widely followed barometer of inflationary pressure in the US – climbed 8.2% in September compared to the same month a year ago, slightly more than the 8.1% expected by experts.
With the upcoming CPI report event on November 10, Bitcoin saw a volatile 12% decline in 24 hours hitting record lows for 2022.
Investors fear that contagion will touch every corner of the crypto market
DCG’s Grayscale Bitcoin Trust holds 633,000 BTC, placing it as one of the largest holders of the digital asset. Another DCG subsidiary, Genesis Trading has exposure to FTX and the recent volatility has left an apparent $1 billion hole in their balance sheet. The fact that Genesis is struggling to secure financing, and signaling that it may have no choice but to file for bankruptcy, leads investors to believe that another black swan event is in the offing.
Related: Why is the crypto market down today?
According to the Wall Street Journal, BlockFi is another crypto-focused company facing imminent bankruptcy if it can’t find a buyer. This is further evidence that FTX outflow can continue to flow through large companies with exposure.
SoFi is also under pressure from regulators. The Senate Banking Committee warned the company in letters on November 21 to comply with banking standards. A response from SoFi is required by December 8.
Is there a possibility for Bitcoin price to reverse course?
The short-term uncertainties in the crypto market do not seem to have changed the long-term perspective of institutional investors. According to Robin Vince, CEO of BNY Mellon, a survey commissioned by the bank found that 91% of institutional investors were interested in investing in tokenized assets in the next few years.
About 40% of them already have cryptocurrency in their portfolios and about 75% are actively investing in digital assets or are considering doing so.
Concerns are high after the meltdown of FTX and the large write-off of Bitcoin is reflected by the high realized losses and increasing short interest recorded by on-chain and derivative data.
In the long term, market participants still expect the price of Bitcoin to rise, especially as more banks and financial institutions appear to be turning to digital cash for settlement purposes even amid the chaos.
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