Bitcoin
What was supposed to be Bitcoin’s strongest season turned into a brutal two-month period for the crypto market.
Important points
- Bitcoin’s decline reflects tight global liquidity and declining bank reserves.
- Citibank analysts say BTC’s decline could portend pain for the Nasdaq.
- A year-end recovery remains possible if liquidity improves.
October and November, historically a bullish period for digital assets, saw significant losses and record liquidations, raising concerns about the link between cryptocurrencies and traditional finance.
The market meltdown began after US President Donald Trump reignited trade tensions with China and announced new tariffs, causing risk assets to plummet. By mid-October, Bitcoin’s The decline triggered the largest liquidation event in crypto market history, wiping out billions of leveraged positions.
Now in November, the damage has spread beyond cryptocurrencies, say Citibank analysts. believe They know why.
The real culprit: disappearing liquidity
In its latest analysis, Citi says liquidity is becoming increasingly scarce across U.S. financial markets. The bank said recent actions by the U.S. Treasury aimed at pulling liquidity from the system have reduced cash available for speculative assets such as Bitcoin.
At the same time, declining bank reserves are adding to the burden. With less excess capital in the system, investors are exiting volatile sectors, leading to a simultaneous cooling in both cryptocurrencies and equities.
According to Citi, Bitcoin’s current weakness is not an isolated correction but part of a broader liquidity cycle that could soon test the resilience of the Nasdaq 100, which has long been supported by the AI stock boom.
Bitcoin correlation breakdown
For much of the year, Bitcoin and the Nasdaq have traded in lockstep. Both have soared as liquidity expands and enthusiasm for risk assets grows. However, once BTC fell below its 55-day moving average, that correlation began to break down.
Citi analysts argue that Bitcoin, which is often a “liquidity barometer” of risk sentiment, is providing an early warning. If the crypto market continues to come under pressure, the tech-heavy Nasdaq could be next to fall.
Path forward: Hoping for recovery during the holiday season
Despite the gloomy picture, the bank believes there is a silver lining on the horizon. If liquidity conditions improve towards the end of the year, both Bitcoin and US stocks could see a synchronized rally. This is like a Christmas rally that marks the start of a historically new risk-on cycle.
Until then, traders appear to be torn between cautious optimism and fading momentum. Bitcoin’s price remains below key technical levels, and the macro liquidity that fueled last year’s rally is drying up.
Citi’s message is clear. This is not just a cryptocurrency fix. It’s a stress test of global risk appetite.
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Alex is an experienced financial journalist and cryptocurrency enthusiast. With over eight years of experience covering the crypto, blockchain and fintech industries, he is well-versed in the complex and evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His approach allows him to break down complex ideas into accessible and detailed content. Follow his publications to stay up to date on the most important trends and topics.