Bitcoin's 26% Decline: Understanding its Relative Strength in the Crypto Market

Bitcoin has experienced a significant drop from its recent peak, yet new data indicates that it has outperformed nearly all major sectors in the cryptocurrency market. This trend highlights changing capital behavior amid the latest downturn.

Key Takeaways

Bitcoin has fallen around 26% in the last three months and 30% from its all-time high of approximately $126,200, currently trading just above $85,000.
Despite its decline, on-chain analytics firm Glassnode reported that Bitcoin has outperformed nearly all major cryptocurrency sectors during the same period.
The total cryptocurrency market cap has dropped about 27.5%, with other sectors such as AI tokens and meme coins experiencing even greater declines.
Bitcoin is viewed by investors as a defensive asset, allowing for capital preservation during periods of volatility.
Recent trends show increased accumulation of Bitcoin by mid-sized holders while older coins are being distributed by long-term investors.

Bitcoin's 26% Decline: Understanding its Relative Strength in the Crypto Market

Bitcoin's Performance Compared to Other Crypto Sectors

The broader cryptocurrency market has faced significant challenges. Total market capitalization fell about 27.5% over the last three months, which is slightly more than Bitcoin's actual decline.

Ether, the second-largest cryptocurrency, has experienced even sharper losses, dropping approximately 36% since mid-September and trading below $3,000.

Crypto Market Decline

Other sectors tied to specific narratives have fared poorly. AI-related tokens have declined around 48%, while meme coin market capitalization has plummeted by about 56%. Assets tied to real-world tokenization are down around 46%, and decentralized finance (DeFi) tokens have also struggled, with declines close to 38%.

Data from Glassnode illustrates how the sell-off unfolded. At the end of September, most sectors were performing neutrally, indicating that capital was still spread out with a willingness to take risks. This changed significantly in early October when a sudden market shock sent nearly all sectors downwards. High-volatility areas like Layer 1s, Layer 2s, AI, gaming, NFTs, and meme tokens fell more dramatically, while Bitcoin experienced a more modest drop, serving as a relative safe haven.

Market Shock Impact

Attempts to recover in mid-October were unsuccessful. Small rebounds in altcoin sectors did not return to pre-decline levels, with Glassnode indicating that no sector reached a neutral performance status.

As losses continued into late October and early November, performance disparity increased, with capital steadily withdrawing instead of rotating. By mid-November, several sectors entered what Glassnode calls a capitulation phase, experiencing intensified downtrends, while Bitcoin and Ether also fell but with Bitcoin sustaining the least damage.

Accumulation Trends and the Market's Shifting Dynamics

By December, the market landscape became clearer. Bitcoin emerged as the strongest relative performer despite still being in negative territory, while Ether continued to lag behind.

Defensive altcoin sectors such as exchange tokens and assets related to staking remained in the middle ground, while speculative areas were at the lower end of performance.

Market Performance Overview

According to Glassnode, the current data highlights that there hasn't been a rotation towards new market leaders; instead, we are seeing graduated losses. Bitcoin has been effective in retaining capital as market liquidity tightens.

This trend of relative strength coincides with a noticeable shift in Bitcoin's market dominance. Earlier in the year, Bitcoin's dominance climbed steadily, peaking at around 65%, aligning with its strong price recovery. However, mid-July marked a decline in dominance as capital shifted towards altcoins.

This trend was disrupted during an October deleveraging event, where forced liquidations temporarily redirected capital back into Bitcoin. Since then, dominance has stabilized between approximately 59% and 61%, indicating a market lacking a solid anchor.

Bitcoin's relative outperformance suggests that investors continue to view it as a safe asset, enabling them to preserve their capital during times when altcoins face pronounced downturns and diminished confidence.

On-chain data adds further insight. Glassnode reported that mid-sized holders—referred to as "sharks," who control between 100 and 1,000 BTC—accumulated about 54,000 BTC over the past week, raising their total holdings to approximately 3.575 million BTC.

Shark Accumulation Pace

This rate of accumulation is the fastest seen since 2012, indicating robust dip-buying from wealthier individuals and institutional investors.

Conversely, selling pressure has arisen from long-term holders and larger investors (OG whales) with holdings above 10,000 BTC.

As reported by Glassnode and Capriole Investments, this distribution from older coins has countered significant institutional buying, which limits potential short-term price increases while keeping downside risks on the radar.