“Ultimately, though, I think the main reason is simply that BTC has come an enormous way in only 15 years, from pennies to six figures, and the world is trying to wrap its collective, financial mind around that fact,” Enneking noted, stating that investors need to adjust to just how much the digital asset’s value has climbed.

Greg Magadini, director of derivatives for digital asset data provider Amberdata, also singled out several developments when explaining the latest drop in bitcoin. He emphasized a widespread sell-off in risk assets during a day when major stock indices suffered declines.

The S&P 500 and Dow Jones Industrial Average both fell more than 1.6% on Thursday, according to Google Finance data.

“Post government shutdown, risk-assets are selling-off as all the ‘good news’ catalysts are being used,” said Magadini. “Fed easing via FOMC, China/US trade co-operation and a now resolved government shutdown,” he continued.

The analyst commented on the recent gains in the stock market, stating that “Let’s not forget that the AI (bubble?) mega rally has often been single handedly responsible for equity indices rallying.”

“A lot of the AI hype is based on future investment and purchases financed by debt. This competes with strong debt needs from sovereign governments and the ‘Digital Asset Treasuries,’” he stated.

Paul Howard, senior director at crypto trading firm Wincent, also mentioned artificial intelligence, singling out “top signals from many in the AI space (notably Michael Burry) as well as diminishing prospects of a December Fed rate cut” as placing downward pressure on digital assets.

DATs A Downside Risk For Crypto

Going forward, DATs, companies that purchase and hold significant amounts of digital currency on their balance sheet, could be a significant downside risk for markets, claimed Magadini.

“If credit markets experience any type of freeze, companies are going to have a hard time refinancing,” he noted. “DATs like MSTR have been reliant on demand for credit to issue convertible bonds to buy BTC.”

“As more companies have come into the DATs market, this demand for credit has only increased,” emphasized Magadini.

“Should there be any kind of bear market in crypto and risk-assets we could see DATs struggle to refinance debt and become forced sellers of their crypto holdings. As crypto is sold, the next tranche of DATs could be forced to sell as well (so-on and so-forth),” the analyst emphasized.

“Although this risk is less pronounced with quality assets (such as BTC) the downward-spiral risk increases for DATs who recently purchased volatile altcoins at peak valuation,” said Magadini.