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Following the recent sharp decline in Bitcoin, Matthew Sigel, Head of Digital Assets Research at VanEck, published a comprehensive market analysis.
Sigel stated that the pullback was primarily due to the unwinding of excessive leverage and that the market was technically approaching the “oversold” zone.
According to Sigel, the Bitcoin price has fallen by approximately 19% in the last week, dropping to the mid-$60,000 range. This decline is due not to a single large liquidation wave, but rather to the rapid unwinding of historically high levels of leveraged positions.
The size of open interest in Bitcoin futures has shrunk by more than 20% in just a few days, falling from $61 billion a week ago to $49 billion. Sigel, noting that open interest had exceeded $90 billion at the beginning of October, stated that the total leverage in the market has decreased by more than 45% compared to its peak.
It is reported that a total of $3-4 billion worth of liquidations have occurred in the cryptocurrency markets in the last week, with $2-2.5 billion of that coming from Bitcoin futures. Sigel stated that this was “significant but not a peak panic liquidation.”
Sigel stated that the selling pressure was not solely due to the unwinding of leverage in derivatives markets, but also that the weakening of the artificial intelligence (AI) theme negatively impacted risk appetite. He noted that investors were beginning to question the sustainability of large-scale infrastructure spending and data center investments.
Sigel noted that this situation is creating secondary pressure on Bitcoin miners who are trying to convert their facilities for artificial intelligence and high-performance computing (HPC), adding that due to tightening funding conditions and weakness in the Bitcoin price, some miners have been forced to sell on the spot market to strengthen their balance sheets.
Sigel also stated that transparency issues in the crypto ecosystem are being discussed again. He specifically mentioned that news regarding ownership changes at World Liberty Finance, owned by the Trump family, has brought the need for regulation back to the forefront. He argued that the Clarity Act, currently under discussion in the US, could reduce uncertainty by introducing standard reporting and transparency obligations.
Sigel noted that Bitcoin is approaching a drop of approximately 50% from its peak to its trough, but pointed out that the volatility experienced is lower compared to past bear markets. He reminded that the 90-day volatility is around 38%, while in the 2022 bear market this rate exceeded 70%.
According to this chart, Sigel argues that despite the deep price drop, the market experienced a more controlled unwind, and that unless a new, Bitcoin-specific negative catalyst emerges, the downside risk may have been significantly absorbed.
Sigel noted that the potential impact of quantum computers on Bitcoin security has recently been debated again, with some investors raising the issue of a soft fork for a possible “post-quantum” update. However, he added that Bitcoin Core developers believe this risk is not an immediate threat in the short term.
On the other hand, Sigel noted that the four-year cycle narrative is still an important point of reference in investor psychology, reminding that historically the average time from peak to trough is approximately 384 days. However, he said that this process does not usually progress linearly and strong rebound rallies can be seen in the intervening periods.
According to Sigel, late-stage stress signals are beginning to emerge in derivative markets. The fact that Ethereum and Solana perpetual funding rates have turned negative on many platforms stands out as an indicator that coincides with historically short-term lows. While Bitcoin funding rates remain slightly positive, they are reportedly under pressure compared to historical averages, indicating a balanced long-short positioning pattern.
Sigel also noted that momentum indicators like the RSI on the Bitcoin futures continuation chart have fallen below 21, entering the oversold region, and stated that such levels have historically signaled stabilization and rebound rallies.
Despite all the negative headlines, Sigel stated that the current pullback could offer opportunities for long-term investors, and also commented on his own position:
“For me, this scale of decline and leverage clearing is becoming increasingly attractive for increasing positions in a one-to-two-year perspective rather than short-term timing. I added spot Bitcoin today.”
*This is not investment advice.