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The crypto market has taken a significant hit this month. While that’s not surprising on its own, what is notable is that the sell-off isn’t being driven by professional crypto traders.
According to a JPMorgan analyst, the bulk of the selling pressure is actually coming from ordinary retail investors. They are cashing out of spot Bitcoin and Ethereum exchange-traded funds (ETFs) en masse, while simultaneously pouring record amounts into equity funds. This makes the current correction different from previous sell-offs this year.
Retail Pulls Billions from ETFs #
JPMorgan analyst Nikolaos Panigirtzoglou notes that approximately €3.5 billion has already been pulled from spot Bitcoin and Ethereum ETFs in November. This exceeds the outflow from February, which previously set the record. This selling pressure pushed Bitcoin below the $94,000 level, which Panigirtzoglou views as a sort of “floor” as it roughly corresponds to the estimated production costs for miners.
Earlier this year, the picture was quite different. In October, it was primarily experienced traders reducing their risk through futures positions, causing the market to fall sharply. According to the bank, that process has now largely stopped. Panigirtzoglou writes the following:
This time, the selling pressure is coming mainly from non-crypto investors, particularly retail investors who entered the market through spot Bitcoin and Ethereum ETFs.”
At the same time, it appears these same investors remain enthusiastic about stocks. Over €83 billion has already been poured into equity ETFs this month. If this pace continues, November could end with around €138 billion in inflows, comparable to the best-performing months of the year.
Crypto and Stocks Behave Differently #
This significant difference in behavior is not new. In February and March, retail investors also sold their crypto ETFs while continuing to buy stocks heavily. It seems many retail investors view crypto as a separate category, distinct from their general risk appetite.
Therefore, the JP Morgan analysts write that this movement is not a signal that investors are avoiding risk in general. After all, stocks are being bought en masse, and even Dutch investors are increasingly investing on average.
Nevertheless, the broader relationship between crypto and the stock market remains intact. The correlation with smaller U.S. tech stocks, in particular, is strong: they often move almost in lockstep with the larger cryptocurrencies.
However, one thing has changed: the most speculative group of retail traders has quieted down in recent weeks. These are individuals who trade heavily in short-term call options or hype-driven stocks. This seems to be more of a breather after a very active period in October, rather than a genuine trend break.