Three Reasons Why Bitcoin Is Struggling to Recover

(Seoul=Yonhap Infomax) Ji Yeon Kim – Bitcoin, the world’s largest cryptocurrency, is on track to post its worst monthly performance since May 2022, as it continues to face significant headwinds in regaining upward momentum.

The price of Bitcoin is currently fluctuating around the $88,000 level. Over the past month, it has declined by more than 23%, and is now down approximately 30% from its all-time high of $126,000 recorded in October.

According to Yahoo Finance on the 24th (local time), three main factors are hindering Bitcoin’s rebound:

• Outflows from exchange-traded funds (ETFs)
• Slowing issuance and capital outflows of stablecoins
• Sales by long-term holders

Outflows from Bitcoin ETFs

Bitcoin-related ETF outflows reached $3.5 billion in November, marking the largest withdrawal since February.

Markus Thielen, CEO of 10X Research, noted, “This indicates that institutional investors have halted new allocations to Bitcoin. These ETFs have been selling Bitcoin, and as long as this selling pressure persists, it will be difficult for Bitcoin to stabilize or rebound.”

Slowing Stablecoin Issuance and Capital Outflows

The slowdown in stablecoin issuance is also weighing on Bitcoin, as it reduces the capital flowing into the broader cryptocurrency ecosystem.

Thielen added, “About $800 million exited the crypto market last week. While the amount is not massive, it suggests that capital is not remaining within the crypto market.”

Unlike Bitcoin, stablecoins are designed to maintain a stable value, typically pegged to assets such as the US dollar. They often serve as a safe haven during periods of high market volatility. In fact, following last month’s sharp decline in the crypto market, the market capitalization of stablecoins increased for several days.

However, this trend has since reversed, with stablecoin market capitalization decreasing by approximately $4.6 billion since November 1.

Thielen emphasized, “It’s not just that new capital isn’t entering; funds are actively leaving the market. This is a key reason why Bitcoin is unable to rise.”

Sales by Long-Term Holders

Sales by long-term holders are also preventing Bitcoin from recovering.

Some long-term investors, anticipating the four-year halving cycle, have started selling as the price declined from its October peak.

Nikolai Sondergaard, research analyst at blockchain analytics firm Nansen, explained, “In every cycle, early investors have sold. After holding Bitcoin for a long time, some may now feel it’s time to use their funds elsewhere.”

Sondergaard added, “A potential reversal in the market could be triggered by the US Federal Reserve’s rate cuts, renewed ETF inflows, or renewed corporate buying.”

jykim@yna.co.kr

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