Bitcoin's bear-market rout deepens as prices hit a 6-month low. Why long-term holders stepping up selling could be a bad sign.
By Frances YueThe benchmark crypto fell alongside a wider selloff in risk assets ThursdayBitcoin tumbled on Thursday and is now trading 22% below its record high from Oct. 6.Bitcoin fell to its lowest level in six months Thursday afternoon, deepening its bear-market rout as long-term holders of the cryptocurrency stepped up their selling.The largest cryptocurrency (BTCUSD) was down 3.4% to $98,308, touching its lowest level since May 8, according to Dow Jones Market Data. It is now trading around 22% below its record high of $126,273, reached on Oct. 6.Pressure has been building as long-term holders - broadly defined by the industry as those who held bitcoin for over 155 days - accelerated their selling, according to analysts at crypto analytics firm CryptoQuant.These holders have sold roughly 815,000 bitcoins over the past 30 days, the highest level over a 30-day window since January 2024, CryptoQuant said."The bitcoin market remains in an extremely bearish phase," the analysts wrote in a Thursday note. It potentially signals a turn in market sentiment, they added, as this group of longer-term investors tends to be the least likely to sell among bitcoin holders.The chart below shows the 30-day sum of bitcoins sold by holders, grouped by how long they had held their tokens.Such selling also comes at a time when demand for bitcoin appears limited, which could signal more downside, according to the CryptoQuant analysts.One example is the slowdown in purchases from companies that have adopted strategies to hold bitcoin on their balance sheets, they noted. In October, public companies across the globe bought just 14,400 bitcoin, the lowest monthly increase of the year, according to data platform BitcoinTreasuries.net.Meanwhile, bitcoin traders had built up large bullish positions in anticipation of a year-end rally, according to Greg Magadini, director of derivatives at Amberdata. When that rally failed to materialize, those positions were unwound, contributing to the price decline, he told MarketWatch.What's more, more cautious investor sentiment and a temporary liquidity drain in the broader financial system during the shutdown, which started on Oct. 1 and ended on Wednesday, likely added pressure on risk assets broadly, contributing to bitcoin's recent weakness, Mark Connors, a former Credit Suisse executive who now pens the Macro Case for Bitcoin newsletter.Investors have grown increasingly skittish about what delayed U.S. economic reports, due to the longest-ever U.S. government shutdown, might eventually reveal about the economy. There have also been concerns that incomplete data might result in the Federal Reserve standing pat on interest rates at its next policy meeting in December.Bitcoin declined alongside other risk assets Thursday, with all three major U.S. stock indexes logging their worst day in more than a month. The S&P 500 SPX ended 1.7% lower, while the Dow Jones Industrial Average DJIA shed 1.7% and the Nasdaq Composite COMP lost 2.3%, according to FactSet data.In addition, bitcoin's latest pullback reflects the crypto market's continued struggle to stabilize after the largest single-day liquidation event in its history on Oct. 10, when more than $20 billion in leveraged positions were erased.That dynamic may also be contributing to bitcoin's underperformance relative to tech stocks this year, said David Tawil, president and co-founder of ProChain Capital.Bitcoin has gained 5.8% year to date, trailing the tech-heavy Nasdaq Composite's 18.6% year-to-date rise, according to FactSet. While bitcoin has mostly traded in tandem with tech stocks in recent years, it "didn't get all of the benefits that a lot of tech stocks got earlier this year, and now it's selling off harder than those tech stocks," Tawil said in a phone interview.Still, Tawil noted that the crypto sector faces significant regulatory tailwinds. If tech stocks recover, bitcoin may be positioned for a major rebound, he added.-Frances YueThis content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.