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Key Takeaways
What’s Driving BTC’s Weakness According to Analysts?
Whale sell-off, tax liabilities and rotation to other better alternatives.
Will there be a recovery in the fourth quarter?
There was still talk of relief if liquidity improved. But a stronger rally depends on the easing of the whale sell-off.
Bitcoins [BTC] The unusually weak performance compared to other assets during the typically bullish season in the fourth quarter continues to draw mixed reactions.
Year-to-date (YTD), gold has outperformed BTC by almost six times, trading up around 60% compared to BTC’s 10%.
And BTC also underperformed the S&P 500 and the Nasdaq Composite. Given its close correlation with equities, the sharp disconnect in October and the subsequent decline has led to several theorems to explain the losses.
Source: BTC vs. Other Assets, TradingView
Fidelity’s tax thesis
The first proposition was the sell-off of whales, especially OG whales, who bought BTC when it was valued in the triple or quadruple digits (under $10,000).
Even in the chain facts illustrated that the long-term holders (LTH) have been unloading since July.
However, analyst PlanB does have that countered the old whale sell-off argument, noting that the dump came from 2024 buyers picking up BTC for $60,000-$70,000.
Source:
Another thesis has been published dubbed the “BTC IPO moment,” referring to a traditional IPO-style distribution that marks a maturing market before another move up.
It involves the sale of old whales to ETFs and treasuries, with a potential rally in BTC once the distribution is complete.
Asset manager Fidelity is also participating in the conversion, but with a twist.
According to Chris CooperVP of Research at Fidelity’s Digital Assets division, the continued sell-off was due to year-end tax considerations and the rotation to better alternatives.
“Long-term holders want to make tax and positional changes at the end of the year, ending the gains they already have.”
Kuiper added that seller exhaustion is not over yet, according to Supply Active, which typically falls during bull runs as whales sell into the rallies and recovers during bear markets.
Source: Glassnode
From a short-term perspective, BTC analyst Willie Woo linked the recent headwinds to liquidity concerns, pointing to the strengthening of the US dollar (DXY).
“High DXY (strong dollar) means a flight to safety and risk feelings among investors.”
He added:
“Underlying this statement is the reality (for now) that the USD is considered a safe haven currency (never mind that it is declining at 7% per year in the long term)”
Still, most macro analysts expect the end of the US government shutdown to provide some relief and strengthen liquidity. It remains to be seen how that will turn out.