Bitcoin experienced a dip in the crypto markets on Tuesday, falling roughly 1% in the last 24 hours to just under $88,000.
This downturn occurred despite gold, silver, and copper climbing to all-time highs (though there has been a slight retreat in Tuesday afternoon trading). U.S. stocks are showing minor gains, with the Nasdaq up 0.45%.
Stocks related to crypto are suffering much steeper losses than the bitcoin drop would indicate.
The poorest performers this year — companies focused on digital asset treasury — faced the heaviest declines overall. MicroStrategy (MSTR) dropped 4.2%, XXI (XXI) slid 7.8%, ETHZilla (ETHZ) decreased by 16%, and Upexi fell by 9%.
Other significant losers included Gemini (GEMI), Circle (CRCL), and Bullish (BLSH), each down about 6%.
Analysts at QCP Capital, a digital asset hedge fund, highlighted tax-loss harvesting as a likely factor in short-term market actions as the year ends, especially under illiquid conditions. This refers to investors selling off poorly performing positions to realize losses and reduce their tax burden.
“The end of the year usually sees PMs [portfolio managers] reducing their exposure to risk assets not only due to the forthcoming holidays but also to create taxable events and manage year-end balance sheets, which in some cases avoid showing cryptocurrency holdings,” explained Paul Howard, senior director at trading firm Wincent.
QCP also pointed out the continued decline in open interest across BTC and ETH perpetual futures — down by around $3 billion and $2 billion, respectively — which has diminished leverage and made crypto markets more susceptible to large price fluctuations.
“This susceptibility is further compounded by Friday’s record options expiry for Boxing Day, which represents over 50% of Deribit’s total open interest,” the firm stated in a morning note. “While downside positioning has eased, the existence of $100,000 calls indicates a lingering, albeit cautious, optimism for a potential Santa rally.”
Nevertheless, QCP anticipates that any sharp movements will likely subside as the new year approaches: “Historically, holiday-driven shifts tend to mean-revert, with price actions often diminishing as liquidity returns in January.”
Looking ahead to next year, Howard from Wincent foresees a period of further consolidation without any immediate triggers to reverse the decline from the early October peaks.
“It will take several months for the asset class to recover to a $4 trillion market cap,” he noted, which is currently at $2.6 trillion.
