Whale sell-offs, tax obligations, and rotation to other better alternatives.
A relief rebound was still on the cards if liquidity improves. But a stronger rally depends on the whale sell-off easing.
Bitcoin’s [BTC] unusually weak performance compared to other assets during the typically bullish Q4 season continues to spark mixed reactions.
In year-to-date (YTD), gold has outperformed BTC by nearly 6x, posting about 60% compared to BTC’s 10%.
And the BTC underperformed the S&P 500 and the Nasdaq Composite, as well. Given its close correlation with equities, the sharp decoupling in October and subsequent decline has raised different theses to explain the losses.
The first floated thesis has been the whale sell-off, especially OG whales, who bought BTC when it was valued in three or four digits (below $10K).
Indeed, even on-chain data illustrated that long-term holders (LTH) have been offloading since July.
However, analyst PlanB has countered the argument of an old whale sell-off, noting that the dump originated from 2024 buyers who scooped up BTC at $60k-$70k.
Another thesis has been dubbed the “BTC IPO moment”, citing a traditional IPO-style distribution that marks a maturing market before another leg higher.
It involves old whales selling to ETFs and treasury firms, with the potential BTC rally if the distribution is completed.
Asset manager Fidelity has also joined the conversion, but with a twist.
According to Chris Kuiper, VP of Research at the Digital Assets section of Fidelity, the ongoing sell-off was due to year-end tax considerations and rotation to better alternatives.
“Long-term holders are looking to make year-end tax and positional changes, calling it a day with the gains they already have.”
Kuiper added that seller exhaustion was not yet over, as per Supply Active, which typically drops during bull runs as whales sell into the rallies and rebounds during bear markets.
From the short-term perspective, BTC analyst Willy Woo linked the recent headwinds to liquidity issues, pointing to the strengthening of the U.S. dollar (DXY).
“High DXY (strong dollar) means a flight towards safety and risk-off sentiments by investors.”
He added,
“Underlying this statement is the reality (for now) that USD is considered a safe haven currency (nevermind in long time frames it debases at 7% per year)”
Even so, most macro analysts expect the end of the U.S. government shutdown to offer some relief and juice liquidity. It remains to be seen how that will play out.
