Bloomberg: As BTC falls, Wall Street faces a stress test

According to Bloomberg, the cryptocurrency market has experienced a rapid and unexpectedly large brutal sell-off over the past few weeks. The drop on Friday brought the price of Bitcoin close to $80,500, marking the worst monthly performance since 2022. The total market capitalization of Bitcoin has evaporated by about $500 billion, with other altcoin markets also suffering heavy losses.

Although the price of Bitcoin is still above the level when Trump won the presidential election, its upward momentum during Trump's first year in office has significantly faded. This month, investors have withdrawn billions of dollars from 12 Bitcoin-related ETFs. The digital asset reserve company (DATs), inspired by Michael Saylor's Strategy Inc., is also facing steeper outflows.

Fadi Aboualfa, head of research at Copper Technologies Ltd., stated that institutional investors do not have a "HODLing" mindset; they rebalance their portfolios when the market declines. This crash lacks the previous systemic pressures and obvious scandal events.

Cantor Fitzgerald & Co. analysts Brett Knoblauch and Gareth Gacetta believe that most of the decline is attributed to the flash crash on October 10, which may have had a greater impact on the balance sheets of many large participants than initially expected, forcing them to sell.

The flash crash on October 10 liquidated $19 billion in cryptocurrency bets within hours, exposing issues of insufficient liquidity in weekend trading and excessive leverage accumulation at some exchanges. Liquidity in the crypto market remains low, and market makers weakened by the crash find it difficult to enter and support prices.

According to Coinglass data, about $1.6 billion in bets were liquidated on Friday. The crypto market is acting as a quick proxy for risk appetite and is mutually influencing the tumultuous trading of tech stocks.

Adam Morgan McCarthy, senior research analyst at blockchain data company Kaiko, pointed out that medical device companies or cancer research firms renaming themselves as "cryptocurrency reserve companies" is a signal of the market cycle. According to CoinMarketCap data, the Fear and Greed index, which measures sentiment in the crypto market, fell to 11 points (out of 100) on Friday, indicating "extreme fear."