In the first week of November, the sentiment in the cryptocurrency market is very poor.

Bitcoin has already dropped to a lower point than the "10.11" crash, failing to hold the $100,000 mark, and even falling below $99,000, marking a new low in the past six months, while Ethereum touched a low of $3,000.

The total liquidation amount across the network in 24 hours exceeded $2 billion, with long positions losing $1.63 billion and short positions liquidating $400 million.

Data source: CoinGlass

The worst hit was a long position of BTC-USDT on the HTX trading platform, which liquidated a single position of $47.87 million, placing it at the top of the liquidation leaderboard.

There are certainly some reasons behind the decline, which we can analyze in hindsight.

Industry Internal

There have been incidents in projects for two consecutive days. On November 3, the well-known DeFi project Balancer was hacked for $116 million due to a code issue. Balancer is a foundational DeFi project, older than Uniswap, and such code problems have a significant impact on the industry.

On November 4, a wealth management platform called Stream Finance collapsed, with the official stating a loss of $93 million, but the reason for the loss is unclear, and the official did not elaborate. The community speculates that it happened on the day of the "10.11" crash.

There is only so much money in the cryptocurrency market, and it has decreased by another $200 million in these two days.

Macroeconomic Perspective

Looking at the global capital markets, on November 4, the entire world was in decline, with even the newly high Japanese and Korean stocks falling, and U.S. stocks also dropping in pre-market trading.

First, there is the interest rate cut. Last Wednesday, the Federal Reserve spoke, and the likelihood of a rate cut in December seems to have decreased, indicating that there is no urgent need to cut rates.

Then, ETFs are also experiencing net outflows. Last week, the net outflow from Bitcoin's U.S. stock ETF was $802 million, with another net outflow of $180 million on Monday, November 3.

On November 5, there was another event: the U.S. Supreme Court will hold oral arguments for a "tariff trial," reviewing the legality of Trump's global tariffs. The uncertainty lies in the possibility that if the final ruling opposes Trump, tariffs may be canceled, leading to new policy adjustments.

The U.S. federal government "shutdown" has entered its 35th day, tying the record for the longest "shutdown" in U.S. history. The government closure has led institutions to hedge against high-risk assets, triggering sell-offs. This may be one of the core reasons for the recent sharp decline.

An earlier article from Wall Street Insights analyzed that the shutdown forced the U.S. Treasury to increase its balance in the Federal Reserve's general account (TGA) from about $300 billion to over $1 trillion in the past three months, reaching a nearly five-year high. This process effectively withdrew over $700 billion in cash from the market.

Such a large-scale liquidity withdrawal has a tightening effect comparable to several interest rate hikes. Key financing rate indicators are all under pressure. According to Bloomberg, the Secured Overnight Financing Rate (SOFR) surged by 22 basis points on October 31, far exceeding the Federal Reserve's target rate range, indicating that the actual financing costs in the market have not decreased with the Fed's rate cuts. Meanwhile, the usage of the Fed's Standing Repo Facility (SRF) is also approaching historical highs.

Spot ETFs Continue to Bleed

The outflow from ETFs is actually more severe than expected.

From October 29 to November 3, the world's largest Bitcoin spot ETF, BlackRock's IBIT, which holds a 45% market share, saw a cumulative net outflow of $715 million over four trading days, accounting for more than half of the total outflow of $1.34 billion in the U.S. Bitcoin ETF market.

Looking at the entire week, from October 28 to November 3, IBIT had a net outflow of $403 million, accounting for 50.4% of the total market outflow of $799 million, with a single-day outflow of $149 million on October 31, setting a record for the highest single-day outflow in the industry.

On November 4, BlackRock's Coinbase Prime custody address also conducted on-chain adjustments of 2,043 BTC and 22,681 ETH, leading the market to speculate that ETF holders are still continuously selling off crypto assets.

Although IBIT currently maintains an asset scale between $95 billion and $100 billion, holding about 800,000 Bitcoins (accounting for 3.8% of the circulating total), the outflow over four days corresponds to about 5,800 BTC, which also accounts for 0.7% of its holdings.

Despite the seemingly small proportion, this is the industry leader, and the demonstration effect is significant.

Looking at other major Bitcoin spot ETFs, the top five are BlackRock's IBIT, Fidelity's FBTC, Grayscale's GBTC, Bitwise's BITB, and ARK's collaboration with 21Shares, ARKB.

Fidelity's FBTC saw a net outflow of $180 million during the same period, accounting for 0.7% of its scale, which is considered moderate; Grayscale's GBTC has slowed down its redemptions after the fee rate adjustment, with an outflow of $97 million this week; the relatively smaller BITB and ARKB saw weekly fluctuations around $50 million.

This wave of redemptions essentially reflects a sharp decline in investors' risk appetite, synchronized with macro high-interest rate expectations and Bitcoin's technical breakdown.

Long-term Holders on the Blockchain are Also Cashing Out Madly

Even more aggressive than ETFs are the long-term players on the blockchain.

In the past 30 days (from October 5 to November 4), wallets that have held coins for more than 155 days, commonly known as "long-term holders" (LTH), have cumulatively net sold about 405,000 BTC, accounting for 2% of the circulating supply. Based on the average price during this period of $105,000, they have cashed out over $42 billion.

These individuals still hold about 14.4 million to 14.6 million BTC, accounting for 74% of the circulating total, making them the largest suppliers in the market. The issue is that their selling pace aligns perfectly with price movements: after Bitcoin reached an all-time high of $126,000 on October 6, profit-taking accelerated significantly; on the day of the "10.11" flash crash, 52,000 BTC were sold in a single day; from the end of October to early November, coinciding with the four consecutive net outflows from ETFs, the average daily sale exceeded 18,000 BTC.

From on-chain data, the main sellers are primarily "middle-generation" wallets holding between 10 to 1,000 coins, which were purchased 6 months to 1 year ago and are currently showing a profit of around 150%. In contrast, whales holding more than 1,000 coins are slightly increasing their holdings, indicating that top players are not bearish; rather, it is the medium-sized profit-taking that is being realized.

Historically, in March 2024, LTH sold 5.05% in a single month, during which Bitcoin fell by 16%; in December of last year, they sold 5.2%, leading to a 21% drop. This time, the October sell-off was 2.2%, with a price drop of only 4%, which is actually considered mild.

However, with both ETFs and long-term holders experiencing outflows, the combined forces have overwhelmed the market.

Judging the Bottom of the Decline

Glassnode has expressed the market view that the market continues to struggle above the short-term holding cost price (around $113,000), which is a critical battleground for both bulls and bears. If it fails to regain this level, it may further retreat to the actual price of active investors (around $88,000).

CryptoQuant CEO Ki Young Ju released a series of on-chain data last night, indicating that the average cost of Bitcoin wallets is $55,900, meaning holders are averaging a profit of about 93%. On-chain capital inflows remain strong. The inability of prices to rise is due to weak demand.

10x Research CEO Markus Thielen stated after the market decline that Bitcoin is approaching the support line since the crash on October 10. If it falls below $107,000, it may drop to $100,000.

Chinese crypto KOL Banmuxia publicly stated today that "the traditional four-year cycle bull market has ended, and Bitcoin will gradually drop to $84,000, then experience several months of complex fluctuations, before following the U.S. stock market's bubble to surge to $240,000 by the end of next year or early the year after."

Currently, the only good news is that historically, Bitcoin has averaged gains in November.

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