Bitcoin has recently experienced a significant downturn, slicing through key support levels and sparking debate among investors. While corrections are a natural part of the crypto market cycle, the current pullback is exhibiting unusual characteristics that suggest more than just a routine deleveraging event, pointing to deeper underlying vulnerabilities.
The Unusual Severity of Bitcoin's Current Correction
Despite being a comparatively smaller 23% dip from its all-time high, Bitcoin's latest correction is exerting unprecedented strain on the market. A key factor lies in the aggressive buying behavior of short-term holders (STHs) near the peak of this cycle. This has led to Bitcoin's supply in profit plummeting to 68%, its lowest since the 2023 bear market. In contrast, similar past corrections saw supply in profit remain well above 75%, meaning fewer STHs were underwater. This cycle, a larger cohort of recent buyers is quickly facing losses, intensifying selling pressure and making the current downturn feel significantly harsher.
A Confluence of Bearish Signals and the Path Ahead
Adding to the market's fragility, a range of bearish indicators are converging to amplify the downside risk. Investor sentiment is gripped by "extreme fear," a hallmark of potential capitulation. This is further substantiated by record-breaking ETF outflows, with November already witnessing over $2.3 billion exiting, potentially becoming the largest monthly outflow on record. Simultaneously, liquidations are mounting, with several days exceeding $1 billion, yet Bitcoin's leverage ratio continues to spike. This unusual divergence, where rising leverage usually indicates a routine flush of weak hands, now signals a more profound market weakness that lacks the capacity to absorb further pressure. The combination of an overleveraged short-term holder base, dwindling supply in profit, pervasive fear, substantial ETF outflows, and a market unable to absorb the ongoing pressure creates a precarious situation. Consequently, the likelihood of Bitcoin breaking below the critical $90,000 threshold appears increasingly high, signalling a potentially deeper correction than many anticipate.
