Bitcoin November sell-off worsens as investors reduce risk

Bitcoin fell victim to investors’ risk-off mood Tuesday as cryptocurrency holders backed off, growing increasingly concerned about the sustainability of stock valuations driven to stratospheric heights by the artificial intelligence trade.

Bitcoin was last trading at $103,952, down 2.5% on the day and roughly 6% in the past two days. Ether, the second-largest cryptocurrency by market capitalization, shed 2.5% on Tuesday and has now lost more than 10% over two days to trade at $3,503.

The leading cryptocurrencies attract many of the same investors as artificial intelligence stocks, linking the two trades when one goes bad. The Nasdaq Composite, home to the leading AI stocks, dropped almost 1% Tuesday, with investors selling AI-linked Palantir on concerns about its eye-watering valuation despite the data manager’s solid earnings results in its latest quarter.

Absent individuals

Compass Point analyst Ed Engel said individual investors may not be buying the dip as much as in the past.

“While selling from Long-term Holders is a common feature in bull markets, retail spot buyers have been less engaged than prior cycles,” he said in a note.

The latest downdraft could pull bitcoin deeper into the red, dragging the token below its critical $100,000 support level, according to the analyst.

“With Long-term Holders still selling, this leaves further downside risk if Short-term Holders’ capitulate further,” Engel wrote. “While we see support for BTC above $95k, we also don’t see many near-term catalysts.”

Bitcoin’s price has largely trended downward over the past few weeks, with October’s historically strong seasonality failing to materialize this year.

Bitcoin last failed to rise on seasonal tailwinds in October 2018, Engel noted. In the month that followed, Bitcoin plunged 37% in November of that year.