After the major reshuffle in the crypto market, the true structural bottom emerges.

Author: The Kobeissi Letter

Compiled by: Tim, PANews

Original title: Is there a “golden pit” after the leverage liquidation? Data indicates that a “structural bottom” is forming in the crypto market.

In the past 41 days, the total market value of cryptocurrencies has evaporated by 1.1 trillion dollars, equivalent to an average daily loss of 27 billion dollars.

After the major liquidation on 1011, the total market value of cryptocurrencies has currently decreased by about 10% compared to before.

I believe this is a structural market adjustment, and this post will explain the reasons in detail.

This decline is quite unusual, and this is said because there haven't been many substantial bearish factors from the fundamentals of the cryptocurrency market.

Just a few days ago, President Trump stated that making America the “leader in the cryptocurrency space” is his top priority.

However, Bitcoin has fallen by 25% within a month.

This seems to be a structural decline, which all started with the outflow of institutional funds in mid to late October.

In the first week of November, cryptocurrency funds experienced an outflow of $1.2 billion. A noteworthy concern is that the leverage levels were too high at the time of the outflow.

The use of leverage in the crypto market is quite aggressive. It is not uncommon for speculators to hold leverage of up to 20x, 50x, or even 100x.

As shown in the figure below, a price fluctuation of only 2% at 100x leverage can lead to liquidation. When millions of traders use leverage simultaneously, it can trigger a domino effect.

Therefore, when the cryptocurrency market suddenly plummets, the scale of liquidation will surge.

As happened on October 11, the $19.2 billion liquidation frenzy led to Bitcoin experiencing a daily candlestick drop of $20,000 for the first time.

Excessively high leverage levels have made the market exceptionally sensitive.

In just the past 16 days, there have been 3 days where the daily settlement amount exceeded 1 billion dollars.

Daily liquidation amounts exceeding 500 million USD have become the norm.

Especially during periods of low trading volume, this can lead to significant fluctuations in the cryptocurrency market. Moreover, these fluctuations are two-way.

This also explains the sudden shift in market sentiment. The Crypto Fear and Greed Index has officially dropped to 10, indicating “extreme fear.”

The current index is now at the same level as the historical low in February 2025. Although Bitcoin has risen 25% since its low in April, leverage is amplifying investors' emotional fluctuations.

Do you still refuse to believe in all this?

Take a look at the comparison chart of Bitcoin and gold since the major liquidation event on October 11. Over the past 12 months, gold and Bitcoin have shown a high correlation as safe-haven assets. However, since the beginning of October, gold has outperformed Bitcoin by 25 percentage points.

The downturn in the cryptocurrency market is more pronounced in assets other than Bitcoin. Taking Ethereum as an example, its year-to-date cumulative decline has reached -8.5%. Since October 6, Ethereum has plummeted by 35%.

Despite a broad rise in various risk assets, the drop in Ethereum has far exceeded the typical bear market level.

When you take a step back, the crypto market seems to be in a “structural” bear market. Although the fundamentals of the crypto market have improved, the factors affecting prices are changing. As with any efficient market, this issue will resolve itself.

Therefore, we believe that the market bottom is approaching.

Apart from the crypto market, other assets have also presented entry opportunities. The macro economy is shifting, and current stocks, commodities, bonds, and cryptocurrencies all have investment value.

The macro reality is that the global M2 money supply has reached a historical high of 137 trillion dollars. Japan is brewing an economic stimulus plan of over 110 billion dollars, and Trump's 2000 dollar tariff bonus is also about to be distributed. For cryptocurrencies, this decline is merely a growing pain in the process of rising.