If you thought the Green Bay Packers had a tough fall from grace this week, just look at crypto.
Bitcoin is down 5.24% over the past week, dipping below $110,000 for the first time in a month. Meanwhile, ethereum has declined 9.72%, while fellow altcoins like Solana, XRP, and dogecoin also fell.
Zoom in: This week, a liquidation wave to the tune of roughly $1.7 billion hit the crypto market like a tsunami. As prices tried to recover, another headwind arrived today: $17 billion in bitcoin options and $5.3 billion of open interest in ether is set to expire this afternoon, raising the chances of even more volatility.
Zoom out: The crypto industry has had a watershed year thanks to the GOP wholeheartedly embracing deregulation and widespread adoption across the world of finance. But momentum appears to be slowing, mirroring a broader selloff in the S&P 500 over the past five days. It doesn’t help that September is historically a relatively weak month for both stocks and crypto.
This Strategy is getting old
While this latest selloff seems to be crypto’s inherent volatility at play yet again, there’s more happening below the surface.
Crypto treasury companies are a group of listless public companies that have turned to buying crypto in bulk as a treasury asset, boosting their share prices. Strategy (formerly MicroStrategy) was the first to start the trend, but the company’s success invited copycats, who have flooded the crypto market with $44 billion this year alone, according to Bloomberg.
That’s been great news for digital assets, whose prices have been bolstered by this corporate demand. But now, the buying spree is slowing down.
Publicly traded crypto treasury companies bought a combined 64,000 bitcoins in July, Bloomberg reports. In August, that figure plunged to 12,600—an 80% decline. The slowdown continued in September, with companies only purchasing 15,500 bitcoins so far this month.
Lower crypto purchases means lower crypto prices. And as the value of crypto falls, so, too, does the value of crypto treasury companies, creating a vicious cycle that can be difficult to break. Strategy shares have sunk 12.04% in the last month.
Analysts are worried about a bubble forming in the AI industry as a circular trade between Nvidia, OpenAI, and Oracle fuels each company’s growth. It might be even worse in the crypto industry—and this bubble could be bursting before our very eyes.—LB
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