Key Takeaways
Is another crypto market wipeout likely?
With $1.1 trillion erased and macro volatility returning, the crypto market remains vulnerable to cascading losses.
How are investors positioning?
Thin bid support and high leverage risk are tilting investor preference toward stocks, while crypto struggles to find a stable footing.
Is the crypto market gearing up for another October-style cascade?
From a capital-flow standpoint, that setup isn’t unrealistic. Over the past 41 days, the crypto market has erased $1.1 trillion in total market cap. And still, the market cap is 10% below the levels seen during the October crash.
In short, a real market recovery hasn’t kicked in yet.
As a result, HODLers’ patience is getting seriously stress-tested.
And with macro volatility returning, conditions are tightening fast. So is the market gearing up for another major wipeout before a real recovery begins?
Crypto market fragility reaches a breaking point
The market is so fragile that one bearish move could trigger a cascade.
To begin with, the TOTAL Crypto Market Cap has printed back-to-back red candles, reflecting nearly a 20% outflow over the last three days alone. As a result, roughly $1.8 billion has been flushed out of the derivatives market.
Notably, 73% of these liquidations came from long positions, totaling $1.3 billion.
This, in turn, supports Tom Lee’s recent argument that leverage is eroding investor risk appetite, keeping any meaningful recovery on hold.
Source: CryptoQuant
Building on that, the data is consistent with what’s happening on-chain.
Bitcoin [BTC] reserves have started to rise again, with holdings on CEXs climbing 0.63% over the past three days to 2.395 million BTC. In practical terms, that’s 15k BTC flowing back, roughly $1.4 billion at current prices.
Put simply, the crypto market doesn’t have a strong enough bid to absorb more volatility.
So the real question is, what happens now that the U.S. government’s reopening brings key economic data back into the mix?
A new week of macro pressure begins, putting markets on alert
The week is packed with a heavy lineup of economic data.
Both September and October releases (including the jobs report) are finally set to come out after the shutdown pushed them into backlog. But beyond the macro prints, there’s another major catalyst on deck.
Nvidia [NVDA] is set to report earnings, with an implied move of +/- 7.5%, signaling a $345 billion swing in market cap. That’s a huge amount of capital with clear potential to influence flows into the crypto market.
Source: TradingView (NVDA/USD)
Notably, this divergence is translating into price action.
On a quarterly basis, NVDA is still up 1.92%, while BTC is down 16.64%, marking its weakest Q4 since 2019. Zooming in, NVDA closed its last trading day on the 14th of November up 1.77% vs. BTC’s 5.2% dip.
Overall, with volatility high, bid support thin, and leverage risk elevated, investors are favoring stocks over crypto.
Against this backdrop, as macro pressure builds, another crypto market cascade looks increasingly likely.
