The Real Reasons Bitcoin Is Falling So Much

In my experience (portfolio manager who has been at this for a while) the broad brush reasons and explanations are mostly backwards-looking and don't accurately explain short term price moves. For example, if in another timeline BTC held up during the risk-off, you would be reading headlines along the lines of "Traders no longer fear seized crypto sales, proving the deeper liquidity of the crypto market as institutional adoption grows."

Not that creative narrative thinking doesn't have a place, but that's best left to the global macro space. In reality, there just aren't that many discretionary traders reading about a 20B BTC seizure in Cambodia and hitting the bid because of it. The underlying forces are waves of speculation that smash through smaller narratives, and systematic flows like robot trading, hedging, spread trading, you name it. Same thing happens in the stock market. There are vanishingly small amounts of discretionary news based traders outside of small caps. Most of the assigned reasons for moves don't have much to do with price moves in reality.

If I had to name a "reason" though, I think you are under-playing the recent carnage a bit. The speculative names are getting taken out to the woodshed in many sectors. Earlier today I covered a few quantum shorts that were down nearly 20%... from earlier mid-week, and these have been some of the leading thematics of the shorter term cycle. Volatility is getting fairly hot. The systematic vol trader who manages that stuff in my book went flat after a long while of shorting vol, and another 35 year pro who manages the active short vol stuff refused to even touch today and parked it until Monday. I was personally forced into selling BTC yesterday in order to hedge options positions as well, anecdotally. Remember, this was opex, so hedging flows dominated the market this week across all asset classes (liquidity is increasingly interwoven).

In the pure crypto space, crypto saw est 10 billion in forced liquidations. Leverage was too high in spec names across the board, including robot positioning (prime broker reports model systematic positioning, and they are pretty full of risk, with implied selling in most timelines, even in slightly down tapes). Silver also dropped 5% and is finally seeing some serious downside volatility. Across all asset classes, speculative narratives are getting hit hard, and crypto generally has correlation with that if it's stretched to the upside.

I think it's a bit late to the game to be pulling out the "gold is a better crypto" card as well. That's been going for months. I'm starting to get texts about how much money x person has made from gold miners, etc. Probably about time for that to unwind... Many areas in crypto were on that sort of bandwagon. Ex: Ethereum treasury had a typical speculative mania going on until the recent unwind. Occam's razor probably says just stick to that when it comes to explaining price. Or better yet, just be agnostic on shorter time-frames.