"Surprised": Fourth-Ever Annual Decline Projected... Why Is Bitcoin Falling Without Major Negative Events?

Bloomberg: "First Annual Decline Without Major Negative Events"
About 8% Down From the Start of the Year... Correction Phase Without Bad News
Excessive Leveraged Liquidations and Whale Sell-Offs Cited as Causes

There are projections that Bitcoin, the leading cryptocurrency, will record its fourth-ever annual decline this year. Unlike previous years, when declines were triggered by negative events, this year’s continued downturn has persisted despite several positive developments, with excessive leverage liquidation cited as a primary cause.

On December 16 (local time), Bloomberg reported that Bitcoin is expected to register its fourth annual decline on record this year, stating, “While the previous three annual declines coincided with major scandals or industry collapses in the cryptocurrency sector, this year’s annual drop marks the first time such a decline has occurred without such issues.”

According to Bloomberg, Bitcoin started the year at a closing price of $94,771 per coin on January 1 and peaked at over $126,000 in early October before beginning a downward trend. As of noon on December 17 (local time) in Singapore, it was trading at around $87,100, representing a decline of about 8% compared to the start of the year.

The previous three annual declines occurred in 2014 (-57.5%), 2018 (-73.8%), and 2022 (-64.3%), all years that saw major negative events for Bitcoin. In 2014, the Mt. Gox exchange was hacked; in 2018, the initial coin offering (ICO) bubble burst; and in 2022, a series of cryptocurrency exchanges, including FTX, collapsed, prompting the Joe Biden administration to implement strict regulatory measures.

In contrast, this year saw several positive developments. Donald Trump, a vocal cryptocurrency advocate, returned to the White House, and the Genius Act, which brings stablecoins into the regulatory framework, passed the U.S. Congress. Nevertheless, after reaching an all-time high in early October, Bitcoin experienced a sharp correction and has since struggled to regain upward momentum.

One industry insider told Bloomberg, “There were numerous positive catalysts, but the market failed to gain any traction, leaving most participants surprised.”

Bloomberg noted that while this year’s decline has been milder compared to previous years, the underlying causes are fundamentally different.

The primary reason cited was extreme leverage. On October 10, $19 billion (approximately 28.1 trillion won) worth of leveraged positions were liquidated simultaneously, triggering a sharp downturn in the cryptocurrency market. Bloomberg also pointed to large-scale sell-offs by “whales”-investors holding significant amounts of Bitcoin-as another factor. These mass sell-offs exerted continued downward pressure on prices and led to a steep drop in trading volume.

Pratik Kala, portfolio manager at hedge fund Apollo Crypto, explained, “The selling by existing whales has definitely broken the upward momentum. The industry got everything it wanted in terms of regulation, but the price failed to follow.”