en.bitcoinsistemi.com
Cryptocurrency analyst Garrett Jin assessed why Bitcoin ($BTC) and Ethereum ($ETH) have lagged behind recently despite the increase in risk appetite in global markets.
According to Jin, the main reasons for this divergence are the unwinding process of leveraged trading in the crypto market, the market microstructure, and price behavior shaped by certain exchanges, market makers, or speculative funds.
Jin notes that the decline that began in October and led to the rapid liquidation of leveraged positions particularly affected individual investors. During this period, a significant portion of speculative capital was wiped out from the market, making the cryptocurrency market more fragile and risk-averse. Simultaneously, sharp increases were seen in AI-related stocks in China, Japan, South Korea, and the US; while precious metals experienced “memecoin-like” rallies driven by FOMO (Fear of Missing Out). According to Jin, these movements redirected individual investor capital, which remains the main driving force in the cryptocurrency market and is primarily based in Asia and the US, to other assets.
According to the analyst, another structural problem is the lack of full integration of cryptocurrency into the traditional financial system. While stocks, commodities, and currencies can be easily bought and sold through the same account in traditional markets, the transition to crypto still faces regulatory, operational, and psychological hurdles. Furthermore, the share of professional institutional investors in the crypto market is limited. The lack of independent analytical frameworks among most market participants allows for the easy spread of unsubstantiated narratives, such as the “four-year cycle” or the “Christmas curse,” which can influence prices.
Jin points out that the time frame in which investment performance is evaluated is extremely important. Looking at the last three years, he notes that $BTC and $ETH have lagged behind many major assets, with $ETH exhibiting the weakest performance. However, in the six-year period since March 2020, both Bitcoin and Ethereum have outperformed most assets, making $ETH one of the strongest assets in the long term. According to Jin, short-term weakness is simply a “reversal” within the long-term historical cycle.
The analyst cites silver, which was one of the weakest risk assets until October of last year, as an example of how it quickly became one of the strongest performers. According to Jin, this also applies to $BTC and $ETH: Despite short-term weakness, they are still among the strongest assets in the long-term cycle. Unless Bitcoin’s “digital gold” narrative and Ethereum’s role in AI and real-world asset (RWA) infrastructure are fundamentally undermined, there is no rational reason for them to permanently fall behind in the long term.
Jin compares the current crypto market to the leveraged rally and subsequent unwinding in China’s A-stock market in 2015. Back then, sharp declines were followed by months of sideways movement, which later paved the way for a multi-year bull market. Jin argues that a similar pattern is being observed today in Bitcoin and crypto indices, noting a decrease in volatility and the formation of contango patterns in futures trading.
Meanwhile, it is noted that macroeconomic conditions are also showing signs of improvement. Increased regulatory clarity, support from the SEC and CFTC for on-chain trading of US stocks, and the prospect of a looser monetary policy framework are seen as supportive factors for crypto assets in the medium term.
Jin, who has recently criticized the labeling of $BTC and $ETH solely as “risky assets,” argues that this approach is selective and one-sided. While acknowledging that Bitcoin and Ethereum fall into the risky asset category due to their high volatility, the analyst states that thanks to DeFi and on-chain consensus features, they can also exhibit safe-haven characteristics similar to precious metals during periods of geopolitical stress.
According to Jin, the main reason why $BTC and $ETH are overly sensitive to negative narratives but slow to react to positive developments is that the crypto market is still nearing the end of its delegitimization process and is dominated by individual investors. Without new and strong capital inflows or a renewed wave of FOMO, it seems difficult for the existing capital to offset this pressure stemming from the micro-structure of the market.
*This is not investment advice.