Bitcoin’s Worst Week Since 2022 The Crypto Doom-Loop

Bitcoin price falls into its worst week since November 2022. Traders are unloading leveraged positions, ETFs experience a reversal in outflows, and a “doom-loop” scenario fueled by fear is emerging in the cryptocurrency market. This article will decode what has occurred, why it matters in current circumstances, and how to navigate it. However, Bitcoin starts to decline from above $120,000 in October to around $80,000 towards the end of November, losing about a third of its value in a short period. This is coupled with massive liquidations in futures contracts exceeding $1 billion, with alts plummeting as risk-off activity sweeps across global markets.It is not uncommon for the crypto markets to see corrections. What has distinguished this phase, however, has been the potent force of leverage, ETF reversals, and uncertainty about certain macro events, mainly when precisely the Fed would begin reducing its rates. Fewer willing buyers at important levels ensure that any slide becomes swifter and sharper.A doom loop gets triggered when traders are forced to sell to pay margin calls. This causes prices to crash, resulting in more forced sales and ETF outflows. This causes prices to crash with bigger gaps and higher volatility, and this phenomenon is seen to continue with lower volumes during holidays. This happens even faster for cryptocurrency derivatives. Leverage retail traders are prominent levers on elevated stages. So are funds that financed long strategies against short-term borrowing for cryptos. Then again, miners, certain kinds of hedged counterparties, or ETF arrangements could also contribute to stress amplification once institutional vehicles change direction to reverse flow, what was once a persistent demand pattern converts into a swift sell channel.It appears now that there are two larger forces at work. First, uncertainty about Fed easing has reduced demand for beta assets, and secondly, underperformance in technology and risk sectors causes passive money to flow out of crypto. This creates a situation where there is limited cheap money to fuel momentum trades and increasingly so when volatility emerges.

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