In the current market environment, Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) have notably lagged behind other risk assets like equities and precious metals.

Crypto analyst Garrett Bullish attributes this underperformance to three primary factors:

• The lingering effects of a deleveraging cycle
• Unique market micro-structure issues
• Potential manipulation by speculative entities

Crypto’s “Ghost Town” Effect: Deleveraging and Retail Exhaustion

The crypto market is suffering from a “deleveraging hangover” that began in October, the analyst noted in an article published on X on Thursday.

This flush wiped out a significant portion of speculative capital, particularly hitting retail traders who often use 10-20x leverage.

Retail capital, the lifeblood of crypto markets in Asia and the US, has been absorbed by the FOMO rallies in AI equities and precious metals.

Unlike traditional finance (TradFi) where capital can frictionlessly rotate between stocks, commodities, and FX within a single account, moving money into crypto still faces friction.

This makes crypto “sticky” — once capital leaves, it is slow to return.

Why Crypto Is Dominated by Noise, Not Pros

Crypto lacks a robust layer of professional institutional investors with independent analytical frameworks.

Instead, the market is dominated by retail participants and passive ETF flows that follow sentiment rather than lead it.

Without strong institutional anchors, prices are easily swayed by flimsy narratives like the “Christmas curse” or simplistic correlations, such as attributing BTC moves solely to Yen fluctuations.

The absence of deep professional liquidity creates an environment ripe for exploitation.

The analyst observes concentrated selloffs during low-liquidity windows designed to trigger liquidation cascades.

Short-term underperformance does not equal a broken thesis.

BTC and ETH have underperformed most assets, with ETH lagging significantly, but remain among the strongest performers globally.

Just as silver was a laggard before becoming the top performer over a 3-year period, crypto’s current weakness is likely a mean reversion within a larger secular uptrend.

As long as BTC remains “digital gold” and ETH integrates with the AI/RWA narrative, the long-term thesis holds.

What Investors Should Know

Labeling BTC and ETH as “broken” because they haven’t rallied with Nvidia or silver is a mistake.

They are simply in a different phase of their specific liquidity cycle.

The deleveraging is nearing completion, futures volumes are at historical lows, and the macro backdrop is improving.

For the patient investor, this “disconnect” is not a warning sign, but a period of consolidation before the next structural leg up.

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