Bitcoin falls below $90,000 as traders turn cautious

Bitcoin fell below $90,000 for the first time in seven months on Tuesday, the latest sign that investors’ appetite for risk is drying up in financial markets.

The risk-sensitive cryptocurrency has lost all of its gains this year and is now nearly 30% below its peak of over $126,000 in October. It was last down 1.1% at $92,891 after slipping as high as $89,286.75.

About $1.2 trillion has been wiped from the total market value of all cryptocurrencies in the past six weeks, according to market tracker CoinGecko.

Market participants said a combination of doubts about future U.S. interest rate cuts and the risk-averse mood in broader markets, which have been shaken after a long rally, dragged cryptocurrencies down.

“Confidence can erode with remarkable speed”

“The cascading selloff is fueled by listed companies and institutions exiting positions after piling up during the rally, exacerbating market-wide contagion risks,” said Joshua Chu, co-chairman of the Hong Kong Web3 Association.

“When support wanes and macroeconomic uncertainty rises, confidence can erode with remarkable speed.”

Speculators who had put money into crypto in hopes of supportive U.S. legislation began to pull back, prompting steady outflows from ETFs and the like in recent weeks, said Joseph Edwards at Enigma Securities.

“The selling pressure here is not great, but it’s coming at a relatively weak spot on the market side … a lot of retail buyers got bitten during the crash last month,” he said, referring to an October crash that saw $19 billion in liquidations of leveraged positions.

Cryptocurrency depositors such as Strategy, miners such as Riot Platforms and Mara Holdings, and exchange Coinbase, have retreated with the bad mood.

There has been an explosion in public cryptocurrency companies this year, with small companies in unrelated sectors becoming cryptocurrency dealers announcing plans to buy and hold cryptocurrencies on their balance sheets.

However, Standard Chartered Bank has estimated that a fall below $90,000 for bitcoin could leave half of these companies’ bitcoin holdings “underwater” – a term that usually refers to holding assets worth less than what was paid for them.

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Listed companies collectively own 4% of all bitcoin in circulation and 3.1% of ether, Standard Chartered said.

The largest corporate bitcoin holder, Strategy, is adding to its stock. Founder Michael Saylor said the company acquired 8,178 bitcoins on Monday.

As of Sunday, Strategy held 649,870 tokens at about $74,433 per bitcoin, Saylor told X.

The cryptocurrency ether has also been under pressure for months and has lost nearly 40% of its value since its August peak above $4,955.

“Overall, sentiment is pretty low for cryptocurrencies and has been since the de-leveraging in October,” said Matthew Dibb, chief investment officer at Astronaut Capital.