NEW YORK: Bitcoin’s slide back below US$60,000 is reviving a fear that has largely been absent from crypto for the past two years: what happens when the market’s biggest buyer comes under pressure just as retail traders lose interest.
The cryptocurrency fell through a closely watched support level on Wednesday as investors grappled with growing concerns about Michael Saylor’s financing machine at Strategy Inc and a broader retreat by individual traders, many of whom have shifted their attention – and capital – to artificial intelligence stocks.
“The market is repricing the whole MSTR and STRC flywheel,” said Shiliang Tang, managing partner at Monarq Asset Management.
He was referring to the ticker symbols for Strategy’s preferred shares.
Almost US$800mil in crypto long positions have been liquidated in the past 24 hours, according to CoinGlass data.
The drawdown comes before today’s quarterly expiration of around US$10bil in bitcoin options, Deribit data showed.
Bitcoin fell as much as 5.4% to US$59,023, the least since October 2024.
It last breached US$60,000 at the start of June.
Strategy’s common shares declined for a sixth-consecutive trading session, reaching the lowest level since February 2024.
The effective yield on the preferred climbed to about 14%.
Retail investors once stepped in aggressively during sharp sell-offs, while Strategy emerged as a buyer of last resort, routinely issuing stock and preferred securities to fund more bitcoin purchases.
Exchange traded fund buyers added another pillar of support, but many who entered when bitcoin was trading far higher are now underwater, making them less likely to absorb fresh losses or add exposure.
That institutional case has also become harder to defend.
Bitcoin failed to reliably hedge portfolios during recent bouts of Middle East stress and inflation anxiety, weakening the diversification argument that helped draw allocators into the asset class.
Instead of behaving like portfolio insurance, it has often traded like another high-volatility risk asset.
“As the path of interest rates continues to shift further away from a potential cut, it is impacting the inflation hedge story of the asset,” said Stephane Ouellette, chief executive of FRNT Financial.
Investors are increasingly focused on signs of strain inside Strategy’s financing model after a prolonged decline in bitcoin left the company sitting on billions of dollars of unrealised losses and raised questions on its ability to fund purchases at the pace markets have come to expect. — Bloomberg