Bitcoin Dives Again in Worst Week for 3 Years. Why This Crypto 'Doom Loop' Will Continue. — Barrons.com
By George Glover and Anita HamiltonThere could be more pain ahead for Bitcoin as the price was dropping again on Friday and the cryptocurrency selloff deepens."From a demand perspective it appears there is an early, yet growing, sense of concern that could evolve into full-on panic if the selling pressure continues to intensify further than it already has, as lower prices would prompt more selling in a doom loop of sorts," analysts at the financial research firm Sevens Report wrote on Friday.The world's largest crypto had slumped 7.7% to $82,844 over the past 24 hours through 11 a.m. Eastern time Friday. It's trading 34% off the record high of $126,272 it hit in early October. Bitcoin is on pace for its worst week since November 2022, when the collapse of crypto exchange FTX sparked a brutal selloff.Other digital assets weren't doing any better. Ethereum dropped 7.5%, Solana fell 7.9%, and XRP tumbled 7.4% over the same period. The move lower came even though futures for the tech-heavy Nasdaq 100, which tends to trade in tandem with the tokens, was mostly flat.Several factors have driven the recent plunge in crypto prices.First, investors are unsure if the Federal Reserve will cut interest rates next month. If the central bank holds borrowing costs steady, that would make Bitcoin and its peers less appealing relative to interest-bearing investments such as bonds and savings accounts. Second, the market has decided this is a good time to rotate out of risk assets, amid questions about lofty artificial-intelligence valuations.A third issue is that many investors bought Bitcoin at around $90,000. With it now trading below that, they may be hesitant to keep buying while their investments are underwater, especially if they borrowed money to buy it and are now facing margin calls. That's when brokers demand more cash from investors to cover the loans. That, in turn, can lead to forced selling, which puts additional negative pressure on the asset's price.Don't count on the crash stopping just here. There could be sizable price swings next week, given that volumes are likely to be thin from Thursday onward due to Thanksgiving. That means it wouldn't take much pressure for Bitcoin to continue dropping."Liquidity will likely dry up across markets this week and heading into the holiday season," Adam Morgan McCarthy, head of research at the crypto data provider Kaiko, told Barron's. "This could exacerbate moves if investors continue to par positions before the holidays and liquidity dries up more."Write to George Glover at [email protected] and Anita Hamilton at [email protected] content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.