Bitcoin rebounds after falling below $90,000, a 7-month low

By Rae Wee and Elizabeth Howcroft

SINGAPORE/LONDON (Reuters) -Bitcoin was trading slightly higher on Tuesday after hitting a seven-month low below $90,000, finding buyers in a market where some investors have been reluctant to embrace risk.

The risk-sensitive cryptocurrency has lost all this year's gains and is now around 26% below a peak above $126,000 in October. It was last up nearly 1.9% at $93,532, after slipping as low as $89,286.75.

"Overall, downside fears are justified in the short term and the path of least resistance remains lower for now," Jean-David Pequignot, chief commercial officer at Deribit, a Coinbase company, wrote in an email note.

"But extreme setups like this have rewarded the bold in crypto's past."

About $1.2 trillion has been wiped off the total market value of all cryptocurrencies in the past six weeks, according to market tracker CoinGecko.

Market participants said a combination of doubts around future U.S. interest rate cuts and the risk-averse mood in broader markets, which have wobbled after a long rally, was dragging down crypto.

'CONFIDENCE CAN ERODE WITH REMARKABLE SPEED'

"The cascading selloff is amplified by listed companies and institutions exiting their positions after piling in during the rally, compounding contagion risks across the market," said Joshua Chu, co-chair of the Hong Kong Web3 Association.

"When support thins and macro uncertainty rises, confidence can erode with remarkable speed."

The bitcoin market has also been rattled in recent days by major outflows from U.S. spot bitcoin ETFs, said several market participants. Since Oct. 10, when equity markets plunged on fears over U.S.-China tariff tensions, $3.7 billion has exited U.S. spot bitcoin ETFs, $2.3 billion of which flowed out in November, according to data from Morningstar.

Speculators who had put money into crypto in the hopes of supportive U.S. regulation have started to pull back, driving outflows from those ETFs and similar instruments in recent weeks, said Joseph Edwards at Enigma Securities.

"The sell pressure here isn't extraordinary, but it's coming at a relative weak point on the buy side ... a lot of retail buyers were stung during the flash crash last month," he said, referring to an October crash in which there were $19 billion in liquidations across leveraged positions.

Crypto stockpilers such as Strategy, miners such as Marathon Holdings, and exchange Coinbase had slid with the souring mood, although they also rebounded in afternoon trading in line with bitcoin.

There has been a boom in public crypto treasury companies this year, with small companies in unrelated sectors becoming crypto-proxies by announcing plans to buy and hold cryptocurrencies on their balance sheets. 

But Standard Chartered Bank has estimated that a drop below $90,000 for bitcoin could leave half of these companies' bitcoin holdings "underwater" - a term which typically refers to holding assets worth less than what was paid for them.

Listed companies collectively hold 4% of all the bitcoin in circulation, and 3.1% of the ether, Standard Chartered said.

The biggest corporate holder, bitcoin treasury company Strategy, has been adding to its stockpile. Founder Michael Saylor said the firm acquired 8,178 bitcoin on Monday.

As of Sunday, Strategy held 649,870 tokens at roughly $74,433 per bitcoin, Saylor said on X.

Cryptocurrency ether has also been under pressure for months and has lost nearly 40% of its value from an August peak above $4,955.

(Writing and additional reporting by Tom Westbrook; Additional reporting by Elizabeth Howcroft, Vidya Ranganathan, Suzanne McGee, Hannah Lang, Michelle Price; Editing by Jan Harvey and Nick Zieminski)