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The confusion has never been this extreme.
Bitcoin, Ethereum, and the wider cryptocurrency market at large are experiencing an existential crisis.
Prices have been getting slammed since October 10, when President Trump began to negotiate major tariffs with China. President Xi mentioned possible export controls on essential rare earth minerals.
From Bitcoin’s October 6 peak, it has since dropped as much as 21.5% in 29 days.
Ethereum saw a peak-to-trough drawdown as much as 35.5% over the same period.
The drawdowns are causing traders and investors to worry that the early stages of a long bear market are here.
Fear is high.
The fear and greed index that measures investor sentiment is currently registering a 21. That puts the market in “extreme fear,” which is the lowest of the five possible categories.
And this fear points to something being felt by crypto insiders…
Investors are experiencing an existential crisis just as a wave of catalysts comes down the pipeline.
These catalysts are even bigger than the last time we mentioned it’s a good time to buy when sentiment was this low.
You might recall that on March 18 of this year, in The Market’s Silent Monster, sentiment was much like it is today. That was just as new stablecoin legislation was making its way through Congress.
Two months after that write-up, the crypto market rose 34% in just over two months… and 63% in just over six months.
The impending catalyst was approaching just as the market was at its most fearful. And it’s happening again today.
Let me explain just what this existential crisis sentiment is truly about. I’ll then cover the catalyst coming our way… This event will let us look back at this moment and realize that this was a great time to enter the digital asset market.
On July 25 of this year, Galaxy Digital helped facilitate the sale of $9 billion in Bitcoin.
It was a staggering sum of Bitcoin. It caused many to think the end was near, considering Bitcoin was trading at an all-time high of $120,000 per coin.
But the details of the transaction revealed something taking place with Bitcoin and digital assets at large.
The seller had accumulated their Bitcoin during the Satoshi era. (This is a way of saying the holder was one of the earliest buyers of Bitcoin.)
They had held through all the ups and downs. They’d even remained steadfast as the industry was being written off completely in early 2019, as Bitcoin was down 85% from its highs, and again in late 2022 after the centralized exchange FTX filed for bankruptcy.
Which begs the question, why sell now?
The truth here is that if this individual sold 80,000 Bitcoin a few years ago, the market would have completely cratered.
To illustrate that point, we can look back to May 2022, when the infamous Terra Luna project sold a little more than 80,000 Bitcoin to help bolster its failing plans.
Bitcoin’s price tanked more than 56% in a month. And this was after the price was down 45% from its November 2021 peak.
Selling 80,000 Bitcoin three years ago quite literally tanked the market.
The fact that Bitcoin is trading above $100,000 nearly four months after such a massive sale is impressive.
But it speaks to something much deeper…
Bitcoin and digital assets are becoming a truly global, liquid, and valuable asset class. It no longer moves as violently as it did before. And it can absorb immense volumes.
That’s because Bitcoin has fully matured as an asset. Or, said in a way relatable to equity markets, Bitcoin already had its initial public offering (IPO).
It’s no longer held by a few big wallets or founders. Instead, it has greater diversity and resiliency than ever before.
What we are seeing now is what often happens after a company has gone public. It goes through a period of sideways price action as founders, early builders, and early investors begin to take profits.
The period can last quite some time.
Take Netflix as an example… It traded between $5 and about $2 from 2005 to 2008, giving it a market cap of around $1.5 billion. Early investors had bought in years earlier for less than $10 million.
These investors helped bring the company to public markets and were cashing out. The old hands were making way for new investors. But this period of transition was followed by a massive move higher. Take a look:
Google, Amazon, Microsoft, and all the largest companies of the modern era all had these similar moments in time.
It’s a changing of the guard, if you will. And shortly after this happens, prices can explode higher.
We’re seeing the same thing unfold with Bitcoin today.
Early investors are making way for the new backers. And with upcoming catalysts, it’s clear which direction we’ll be moving.
But before we get to that, let’s showcase this changing of the guard with some data…
Bitcoin is fascinating to analyze, thanks to the network being transparent and permissionless. We can look at the full history of the coin’s movements, the potential profit each wallet is sitting on, and how long investors hold Bitcoin on average.
We call this on-chain analysis. It’s an area of focus for me as an economist with over a decade of which has been spent analyzing crypto.
And to showcase this maturation of Bitcoin unfolding, we can look at something referred to as “accumulator addresses.”
These are addresses that have had multiple purchases over a certain amount. And right now, they are skyrocketing.
Source: CryptoQuant
Since the old Bitcoiner sold their $9 billion worth of Bitcoin in July, we have seen 265,000 BTC accumulated.
That’s more than $26 billion worth of Bitcoin. It is an amount that is unprecedented, as you can see in the chart above.
The new guard is coming into Bitcoin on the heels of it becoming an institutional asset. Just in the last few years, we’ve witnessed the rise of spot ETFs, covered call strategies, basket investment products, new brokerage offerings, and other investable instruments.
Bitcoin is no longer an early-stage asset. It is robust and able to absorb volumes that rival the largest investable assets.
This is the existential crisis taking place for digital assets. It’s the moment where the asset class reaches “adulthood” in capital markets.
It’s no longer for the early risk takers and backers.
Bitcoin is a Wall Street asset now.
And the reason for the shift is quite clear.
The largest catalyst is on the horizon…
The U.S. government has been shut down for over 36 days now.
This has brought regulatory and legislative efforts to a halt. This includes the piece of legislation enabling President Trump’s goal of making the U.S. the crypto capital of the world.
It puts the SEC and CFTC’s Project Crypto on hold.
And even the impending CLARITY Act, which provides digital assets with an initial framework within the global financial system, is on hold.
Despite all of these headwinds, progress continues. Democrats and Republicans have been holding various meetings relating to the CLARITY Act. President Trump nominated a very pro-crypto CFTC chair less than two weeks ago.
And even this week, the White House AI and Crypto Czar David Sacks has been holding meetings with relevant parties to move the CLARITY Act forward.
As soon as this shutdown ends, the item at the top of the docket for this administration, regulators, and Congress is pushing the digital asset industry forward.
If we read between the lines here, it becomes obvious why record accumulation is happening.
And it’s understandable why early believers of the digital asset space feel like they are having an existential crisis.
The industry is transitioning to a new guard. One that will make the industry one of the most investable areas of the coming year.
There will be no better time than now.
We’re about to see a wave of assets make moves that mimic the soaring prices of Amazon, Google, Microsoft, and Netflix.
Bitcoin’s IPO event is in the rearview mirror, and the new wave of buyers is already taking their position.
It’s time we take ours as well.
Your Pulse on Crypto,
Ben Lilly
Senior Crypto Analyst, The Bleeding Edge
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
