Following a period of sharp volatility and a significant correction in November, the crypto market is back under the microscope. Our CEO & Managing Director, Morty, recently joined ABC News Finance Presenter, Alicia, to dissect the driving forces behind Bitcoin's price slump and share his medium-to-long-term outlook.
Morty began by framing the recent downturn not as a crypto-specific event, but as a reaction to global uncertainty.
"When there are periods of anxiety where investors feel like they would rather wait on the sidelines, Bitcoin and crypto overall is one of the first sectors to feel it. It's similar to the canary in the coal mine."
This systemic risk-off environment was clearly visible in institutional flows:
A key observation during the correction was the divergence between Bitcoin and its traditional "safe haven" peer, gold.
In November, gold continued to increase while Bitcoin's price action largely followed the AI stocks. This contrasts sharply with the first half of the year, where gold and Bitcoin often moved in tandem.
Alicia posed the critical question: Has Bitcoin lost its safe haven appeal and is it now seen purely as a risk asset?
Morty's Take: "It's now being seen more closely and more related to AI stocks... a lot of clients that have got exposure to AI have also got exposure to Bitcoin."
The rationale is clear: Investors fearful of an "AI bubble forming" are pulling back high-risk capital. Since Bitcoin is one of the most liquid assets globally, trading 24/7, it becomes the easiest asset for institutional investors and fund managers to sell to reduce overall portfolio risk.
Bitcoin ETFs were the story of institutional adoption in 2024, providing easy exposure to crypto for traditional finance. Morty explained how the ETFs, which were instrumental in the initial price surge, have exacerbated the recent decline.
"ETFs just exacerbate that liquidity piece... The same way that it gave investors easy access to get exposure has also meant that they've also got an easy way to get liquidity out of the market."
ETFs serve as a vehicle to concentrate Bitcoin into a more easily accessible format. This easy accessibility works both ways: easy to buy into, and just as easy to sell out of, significantly amplifying the speed and scale of the sell-off.
Morty highlighted that the downturn is compounded by an internal market problem: leverage.
The combination of:
...creates a "double whammy." The market is fundamentally fragile when highly leveraged. When prices fall, it triggers a chain of forced selling and liquidations that only makes the slump more drastic than in traditional assets like AI stocks.
The market's anxiety is affecting even the sector's biggest believers. MicroStrategy's share price saw a significant discount, with its market capitalisation reportedly dropping below the value of the Bitcoin it owns. This reflects a broader investor concern that risky assets, including the AI sector and Bitcoin, may be overvalued.
Morty also pointed to external factors like rising Japanese bond yields contributing to a general anxiety about global liquidity and debt obligations.
Despite the short-term pain, Alicia reminded Morty of his bullish medium-to-long-term outlook, asking if it had changed.
Morty’s Answer: "Over a medium-term, if you zoom out a bit, it’s still the best performing asset in the last 10, 5 years, the only one that might come close to it might be Nvidia."
His long-term outlook is rooted in the fact that "fundamentally nothing has really changed about Bitcoin." The current period is merely a volatile market cycle, and he anticipates future catalysts:
This recent episode serves as a powerful reminder that Bitcoin is increasingly integrating with traditional financial markets, making it subject to the same global macro forces that move stocks and bonds.
Disclaimer: This blog post is based on commentary provided by our CEO and Managing Director on recent news and is for informational purposes only. It is not financial advice. Investing in volatile assets like cryptocurrency carries significant risk.
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