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Key takeaways
What explains the weakness of BTC according to analysts?
Whale sales, tax obligations and rotation to other better alternatives.
Will the fourth quarter see a rebound?
A relief rebound was still to be expected if liquidity improved. But a stronger recovery depends on easing the whale trade.
Bitcoin (BTC) Unusually weak performance relative to other assets during the typically fourth-quarter bull season continues to draw mixed reactions.
Year-to-date (YTD), gold has outperformed BTC by almost 6x, posting around 60% versus 10% for BTC.
And BTC also underperformed the S&P 500 and Nasdaq Composite. Given its close correlation with stocks, the strong decoupling in October and the decline that followed raised different theories to explain the losses.
Source: BTC versus other assets, TradingView
Fidelity’s tax thesis
The first thesis launched was the sale of whales, particularly OG whales, who bought BTC when it was valued at three or four figures (below $10,000).
Indeed, even in chain data Shown that long-term holders (LTH) have been offloading since July.
However, the PlanB analyst against the argument from an old whale sale, noting that the dump came from 2024 buyers who scooped BTC between $60,000 and $70,000.
Source:
Another thesis was double the “BTC IPO moment,” citing a traditional IPO-style distribution that marks a maturing market ahead of further upside.
This involves selling old whales to ETFs and treasury companies, with a potential BTC rally if the distribution is completed.
Asset manager Fidelity also joined the conversion, but with a twist.
According to Chris Kuipervice president of research at Fidelity’s Digital Assets section, the pending sale was due to year-end tax considerations and a rotation to better alternatives.
“Long-term holders are looking to make tax and position changes at year-end, ending the gains they already have.”
Kuiper added that seller burnout is not yet over, according to Supply Active, which typically falls during bull runs when whales sell during rallies and rebounds during bear markets.
Source: Glassnode
From a short-term perspective, BTC analyst Willy Woo linked recent headwinds to liquidity concerns, highlighting the strengthening U.S. dollar (DXY).
“A high DXY (strong dollar) signifies a flight to safety and a sense of risk aversion on the part of investors.”
He added,
“Underlying this statement is the reality (for now) that the USD is considered a safe haven currency (never mind over long periods of time it depreciates at 7% per year)”
Still, most macroeconomic analysts expect the end of the U.S. government shutdown to bring some relief and additional liquidity. It remains to be seen how this will happen.
