Bitcoin shed more than $18,000 in November, with its year-to-date decline placing it among the worst-performing asset classes of 2025.
I have never been a Bitcoin loyalist and have never cared whether the coin is in the green or red on any given day. My only concern, inherited from my commodity trading years, is to end up on the right side of the industry.
I felt the same about oil, gas or carbon – direction matters, not ideology. What I do believe in, however, is that blockchain as a technology, and as a category to invest in, is here to stay. It has already become institutional and, once that happens, retail stops being the marginal price setter. In other words, large financial institutions now drive most of the trading volume, not individual investors.
With that context in mind, it becomes easier to look at what happened in November and where things may be heading.
Flash crash
After the sudden and sharp drop in October caused by forced liquidations and thin liquidity, November opened with a near 10 per cent fall from $110,000 to $100,000 in a matter of days. Bitcoin tried to claw back some ground but ran straight into the headwinds of the broader artificial intelligence trade unwinding as investors pulled money out of AI-linked stocks after months of heavy inflows.
Nvidia, now a $5 trillion giant worth more than twice the entire Bitcoin market capitalisation, posted strong earnings that beat expectations. The celebration lasted about two hours before markets sent the stock lower. This was not surprising. Cracks had been visible across the AI complex for months.
Some commentators have criticised what they call the circular AI economy, where one AI company books a $500 billion order from another, which then books an order from a third, and so on.
One transaction gets counted as revenue four times. It sounds dramatic until you realise this is no different from how money velocity works in everyday economic life. You earn Dh100 ($27.22), spend Dh80 on flowers, the florist spends Dh70 on eggs and the farmer spends Dh60 on fertiliser. As long as these transactions are not financed by leverage, the system functions.
The problem arises when they are. This is exactly where the strain started to show. Credit default swap spreads for the major AI names have risen more than 15 per cent in the past month, signalling that the liquidity fuelling the AI arms race may now be tapping into less-stable pockets of capital. Rising credit default swap spreads indicate lenders see a higher risk of default.
This brings us back to Bitcoin. Once you accept the coin is now institutional, the dynamic becomes clear. When the biggest trade in global markets begins to wobble, risk appetite disappears. Bitcoin may still aspire to be digital gold in the long run, but today it behaves like a classic risk-on asset, which rises when investors are confident and falls when they become cautious.
Selling accelerates, positioning gets cut and correlations converge. This alone explains a large portion of the move.
MicroStrategy rumour mill
To add some intrigue, rumours circulated at the same time about a co-ordinated attack on MicroStrategy, the largest corporate holder of Bitcoin. The story goes that a group of hedge funds went long Bitcoin and short MicroStrategy to exploit the premium of the listed shares over underlying holdings. In simple terms, this means betting on Bitcoin rising, while betting MicroStrategy’s share price would fall towards the value of its Bitcoin holdings.
They allegedly built the position from February and began unwinding it in November by selling Bitcoin and buying back MicroStrategy. To keep the equity price depressed during the unwind, the group was said to have seeded a wave of negative coverage about the company. The selling pressure on Bitcoin then compounded what was already a fragile market.
Having had to unwind large positions myself, including positions big enough to move the market and consume most of the day’s natural liquidity, I can say this sort of operation is theoretically possible but practically very difficult at the size described. You expose yourself to execution slips, timing risk and information leaks. These refer to the price moving against you, being forced to trade at the wrong moment, or others learning what you are doing. Pulling it off cleanly requires more luck than most hedge funds would bet their reputations on.
A far more plausible explanation was offered by another X user. The recent drawdown pushed Bitcoin into some of its most oversold conditions in years. The downward momentum, measured by the velocity and persistence of selling pressure, exceeded levels seen during the FTX collapse that sent Bitcoin to $16,000. That context matters because it suggests what the new bottom may look like. We could certainly see Bitcoin trade with an eight, a seven or even a six handle if liquidity remains thin and macro stays hostile. This means trading in the $80,000s, $70,000s or $60,000s. But the realistic downside from here is limited compared with the upside still implied by the more optimistic long-term projections from the likes of Michael Saylor, Cathie Wood and others.
As always with Bitcoin, positioning and flows dominate the month-to-month noise, while the structural story continues to develop underneath. This cycle is no different.
Bitcoin then dumped another $5,000 in three hours, yet the buying was relentless. BlackRock alone absorbed 12,500 Bitcoin last week. MicroStrategy added the equivalent of about 2,000 Bitcoin. Bhutan and El Salvador continue to quietly expand their sovereign reserves, while even developed countries such as the UK and France now have parliamentary lobbies arguing for strategic Bitcoin holdings. That is not the behaviour of a market losing relevance.
Meanwhile, Peter Schiff, once a notable economist, continues to post “Bitcoin is dead” every few hours, as if the past 10 years of being consistently wrong were a minor detail. His followers have been talked out of owning the best-performing asset of the past decade.
Time frames matter
This is the point most people forget: time frames matter. Bitcoin is the worst performer this year and the best performer over the past 10 years. If you are a trader, fire up your charts and algorithms and trade the swings. If you are an investor, periods like this are opportunities to average in and check back every six months. It is a volatile asset and always will be. Selling the farm and going all in, as some Bitcoin maximalists encourage, may work out, but it is still terrible risk management. A bad decision that happens to produce a good outcome remains a bad decision.
For those who enjoy a good conspiracy theory, the rumour doing the rounds in the quant trading chats is that a major Wall Street bank involved in the sell-off has now “called” a bottom at $80,000 and is shouting about a $240,000 price target. Conveniently, this comes just as they launched their own Bitcoin-backed trading instrument. Treat it for what it is – a rumour, nothing more. But as we learnt during the Covid-19 pandemic, headlines and narratives can move extraordinary sums of capital. The downside and upside asymmetry from here remains attractive and, if nothing else, it is refreshing to see crypto, an asset class historically filed under “alternative”, behave alternatively to the S&P and Nasdaq – even if it is not in the direction most maxis would prefer.
Yevgeny Bebnev is chief investment officer at Pelican Investments
