Key takeaways:
Bitcoin fundamentals remain intact despite the $1 trillion drop in the crypto total market cap.
Long-term holders and institutional investors continue to absorb Bitcoin’s distributed supply.
Analysts argue that the decline is structural, driven by leverage and rotations, rather than bearish sentiment.
The crypto market has erased more than $1.1 trillion in value over the last 41 days, averaging a staggering $27 billion loss per day, according to the Kobeissi Letter. Yet analysts argue that this is not a bearish collapse, but a structural reset driven by leverage, liquidity rotation, and mechanical market flows.
According to the Kobeissi Letter, the downturn is a strange anomaly due to the absence of a major negative fundamental catalyst. US political leadership has expressed strong pro-crypto sentiment, and yet Bitcoin (BTC) is still down 25% in a month. The newsletter attributed the slide to institutional outflows beginning in late October, followed by a leverage-driven liquidation cascade. With many traders operating at 20x–100x leverage, even a 2% move can trigger mass wipeouts, fueling hyperactive volatility.
Likewise, John D'Agostino, head of institutional strategy at Coinbase, reinforced the view that the downturn is mechanical rather than fundamental, arguing that nothing material has deteriorated in crypto’s underlying picture since late September. Instead, several major developments actually strengthened the long-term thesis.
In a recent segment of CNBC’s Squawk Box, D’Agostino noted that the Czech National Bank recently became the first eurozone central bank to purchase Bitcoin, a landmark signal of sovereign adoption. At the same time, companies like Citibank and JPMorgan have started launching and testing stablecoins to facilitate global customer transactions, a step that would have been “unthinkable” during previous market cycles.
The Coinbase executive added that crypto ETFs continue to perform strongly, with the Solana ETF achieving the best ETF launch of the year, further validating institutional demand despite price volatility. From a regulatory standpoint, the environment is no worse than it was before October, with global jurisdictions maintaining or expanding pathways for compliant crypto activity.
From a strategy standpoint, D’Agostino said that if investors believed in the fundamental value of Bitcoin, the current environment mirrors buying discounted goods at a supermarket.
Related: Strategy steps up Bitcoin buys with 8,178 BTC purchase
BTC structural shift begins as selling pressure eases
Glassnode noted that distribution pressure is finally easing across several key holder cohorts after weeks of heavy selling, a potential early sign that the most aggressive supply is behind with BTC already 25% off its highs.
CryptoQuant data reinforced this narrative with long-term “price-insensitive” holders absorbing 186,000 BTC since Oct. 6, the largest increase in recent cycles. Historically, such surges precede major rallies, but this time the price has fallen, creating a rare divergence. Analysts currently viewed two high-probability outcomes:
A powerful rally as supply dries up and smart money distributes higher.
A final washout, clearing remaining appetite before a durable trend forms.
Either way, the signal is clear: long-term capital is stepping in while sentiment collapses, and such divergences “never last long.”
Related: Rare Bitcoin futures signal could catch traders off-guard: Is a bottom forming?
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.