Analysis of the Key Reasons Behind the Crypto Market Decline Over the Past Month
The crypto market has experienced a severe downturn over the past month, causing significant difficulties for investors. Even as the stock market repeatedly reached new all-time highs, only crypto continued to fall—a highly abnormal situation suggesting that multiple complex factors were at play beyond a simple end-of-season effect. In particular, uncertainty surrounding interest rate cuts and investors’ fear of the season’s end have applied downward pressure across the market.
Another major factor is the drying up of liquidity within the crypto market. Although many investors are holding cash, funds are not actually flowing back into the market. As a result, even when buying opportunities arise at lower price levels, no meaningful rebound is occurring. This lack of liquidity is a powerful downward force that erodes the market’s vitality.
The Impact of the Liquidation Day and the MSCI Announcement
The most important event in this downturn occurred on October 10—the so-called ‘Liquidation Day’. The scale of liquidations that day was enormous, reaching nearly ten times the size of the FTX collapse. As a result, countless investors lost funds and left the market, inflicting structural damage that will be difficult to recover from in the short term.
Adding to this, an announcement from MSCI, the world’s second-largest index provider, further destabilized the market. On the same day, MSCI privately informed its wealthy clients that it was considering excluding companies holding more than 50% of their assets in digital assets from global indices. This was seen as a disadvantageous move for digital-asset-based companies and increased selling pressure on Bitcoin-related stocks.
Based on this proposal, around 40 companies—including Michael Saylor’s MicroStrategy—were listed as potential exclusion targets. If excluded, it was estimated that up to $8.8 billion could flow out. However, Saylor emphasized that his company is a software company, not merely a fund, and that they have no plans to sell Bitcoin. Therefore, he argued the stock decline was unlikely to lead to Bitcoin dumping.
The MSCI decision may serve as a short-term negative factor for investor sentiment, but in the long run, it can be seen as a natural step in Bitcoin becoming classified as an independent asset class. Index exclusion may actually increase the share of regulated financial products such as spot ETFs, potentially strengthening market stability and institutional demand.
The Behavior of the Wealthy and the Reality of Information Asymmetry
An interesting point is that wealthy individuals gain access to information far faster than ordinary investors. The MSCI notice was delivered immediately to affluent clients on October 10, but it reached the general public much later. This information asymmetry creates a significant gap among market participants.
The latest asset allocation report from Tiger 21—a representative ultra-wealthy network—shows a very meaningful shift. Members of this group typically possess over 30 billion KRW in net worth. According to the report, they reduced their cash allocation from 9% to 2% and doubled their crypto allocation from 1% to 2%. This indicates that despite the fear freezing the market, they view crypto as the fastest-growing asset class and are proactively investing.
The wealthy do not chase money—they move first to where money will flow. Therefore, we must closely observe their actions and develop the wisdom to respond by reading the flow, even if information asymmetry cannot be fully overcome.
Key Lessons Investors Must Remember
Taking all these factors into account, we can draw the following lessons:
First, major negative events are often priced in ahead of time. Risks that are already priced in cannot cause further large declines.
Second, when liquidity starts to return, the markets that rebound the most are those that fell excessively first.
Third, changes in the asset allocation of the wealthy are always important signals of major trends.
Fourth, although information asymmetry cannot be completely overcome, we can still respond effectively by understanding the direction.
Conclusion: This Is a Painful Period, but Also a Stage Where Opportunities Are Being Formed
The extreme decline in the crypto market is not simply a bear phase but a complex crisis caused by overlapping structural factors. However, with negative events largely priced in, wealthy investors already making moves, and the market likely to gain clearer direction after the MSCI developments, this is a period where strategic observation is essential. Once liquidity returns to the market, the asset class most likely to show the strongest rebound is the crypto market.
