Here’s why Citi says crypto prices have been weak recently

Cryptocurrency markets experienced significant weakness, with October seeing a record $19 billion liquidation of leveraged digital token positions following U.S. tariff threats against China and export control tightening. Bitcoin subsequently recorded its first monthly loss since 2018, falling below $100,000 and entering a bear market, down over 20% from its early-October peak. Citi analysts noted a decline in large Bitcoin holders ("whales") and bearish technicals, including the token trading below its 200-day moving average, indicating a potential shift in market dynamics despite an early adoption cycle, with spot ETF flows being key for sentiment change.

Analysis

The cryptocurrency market experienced a significant downturn in October, marked by a record $19 billion liquidation of leveraged digital token positions, primarily driven by U.S. threats of triple-digit tariffs on China and tighter software export controls. This event led Bitcoin to its first monthly loss since 2018, pushing it into a bear market after falling over 20% from its early-October high of $126,186.0 and briefly dipping below $100,000.

Further market weakness was evidenced by an additional $1.27 billion in leveraged long positions being wiped out earlier this week. Citi analysts, including Alex Saunders and Nathaniel Rupert, noted a gradual decline in Bitcoin "whales" (large holders) and an increase in smaller retail wallets, suggesting potential selling by long-time holders. Declining funding rates also indicate reduced demand for leverage within the market.

Technically, Bitcoin's position below its 200-day moving average signals bearish sentiment and potential suppression of demand. While analysts acknowledge the early stage of the adoption cycle for financial advisors, they emphasize that spot ETF flows will be a critical determinant for a shift in overall market sentiment. The crypto struggles occurred even as stock indices initially climbed on AI enthusiasm, highlighting a divergence in risk appetite.

Key Decisions for Investors

• Investors should exercise caution given the strongly negative sentiment, significant leveraged liquidations, and bearish technical indicators for Bitcoin.
• Monitor the trend of large Bitcoin holders ("whales") and funding rates as indicators of institutional and speculative interest, as their decline suggests reduced conviction.
• Pay close attention to developments and flows related to spot Bitcoin ETFs, as these are identified as a key catalyst for potential sentiment reversal.