Here’s why Citi says crypto prices have been weak recently
Investing.com - Cryptocurrency markets have been weak recently, after October saw the biggest liquidation of digital tokens in history in the wake of U.S. threats to slap triple-digit tariffs on China and tighten software export controls.
On October 10, worries over the implications of these statements spurred more than $19 billion in liquidations across leveraged positions in the crypto sector.
Analysts suggested that it was largest 24-hour wipeout ever seen in the crypto market, nine times the size of one in February as well as 19 times bigger than another in 2020.
Bitcoin, the world’s largest cryptocurrency, later slumped to its first monthly loss since 2018 in October, even as stock indices climbed on enthusiasm around the applications of artificial intelligence.
That AI euphoria eased somewhat last week as investors fretted over the sustainability of frothy tech sector valuations, and the dampened risk sentiment did little to provide a boost for Bitcoin.
On Wednesday, Bitcoin slid briefly fell below the coveted $100,000 level, at one point dipping to its weakest level since mid-June. Bitcoin also entered a bear market, having fallen over 20% from its early-October record high of $126,186.0.
Analytics firm CoinGlass also showed over $1.27 billion in leverage positions across crypto were wiped out earlier this week. A bulk of these liquidations were of long positions, as traders betting on more price gains in Bitcoin were hit by the token’s losses.
In a note to clients, analysts at Citi added that data has shown a gradual decline in Bitcoin "whales," or large holders of the cryptocurrency, while smaller "retail" wallets have grown.
"Some large, long-time holders may have turned to sellers. Declining funding rates may also suggest reduced demand for leverage," the Citi analysts including Alex Saunders and Nathaniel Rupert said.
"Technically, things are no brighter with Bitcoin now trading below its 200-day moving average, which is also likely to suppress demand. We still think we are early in the adoption cycle for financial advisors and other investors, but spot ETF flows will be the key to watch for a change in sentiment," they added.