Bitcoin faces three major challenges

While prices remain above 88,000 dollars per token — or roughly 30 percent below their October record highs of over 126,000 dollars — the troubles of the market’s leading cryptocurrency don’t seem to be easing.

Bitcoin is facing three major challenges as investors and strategists dig through the wreckage of this month’s slump, CE Report quotes Kosova Press.

First, bitcoin exchange-traded fund (ETF) outflows for November have reached 3.5 billion dollars, the largest since February.

“This shows that institutional investors have stopped allocating to bitcoin. These ETFs have turned into sellers, and as long as they continue selling, I think markets will struggle to stay elevated or recover,” said 10X Research CEO Markus Thielen.

Another issue, according to Thielen, is the slowdown in stablecoin issuance, a warning sign that may suggest less capital is flowing into the crypto ecosystem. According to the firm’s data, around 800 million dollars exited cryptocurrencies and moved back into fiat last week. While not a massive number, it reinforces the trend that money is not staying within the market.

A stablecoin is a crypto asset that, unlike bitcoin, is not supposed to fluctuate. Instead, its price is pegged to other assets, most commonly the US dollar. Because they offer safety during volatile crypto-market swings, their market capitalization often increases during periods of instability. This occurred in the days following last month’s historic crypto wipeout, reported Yahoo Finance, as carried by KosovaPress.

However, the trend has reversed. By November 1, the total market capitalization of stablecoins had dropped by 4.6 billion dollars, according to DeFiLlama.

“Money is not only failing to enter but is actually leaving the crypto market,” said Thielen. “This is why bitcoin dominance isn’t rising.”

Bitcoin has struggled to recover since the October 10 liquidation event wiped out 19 billion dollars in a single day.

The third challenge bitcoin faces is that long-term holders had already begun selling during the decline, possibly in anticipation of the token’s historical four-year cycle. Bitcoin’s past performance from peak to bottom has largely followed the supply-cut event known as the “halving.” Many investors now doubt that the same trajectory will repeat.