Key Highlights

● Bitcoin traded near $81,500 to $81,600 and was headed for a second weekly loss.

● A roughly $1 billion liquidation wave hit crypto from Thursday into Friday.

● MSCI rules could remove Strategy from its global indexes after the Nov 30 close.

● Miners fell sharply, and the Fear & Greed Index stood at 30, in Fear territory.

A second losing week

Bitcoin traded around $81,500 to $81,600 on Friday, slightly lower on the day, according to market data, and was headed for a second straight weekly loss. Other quotes during the session ranged somewhat higher, between about $81,800 and $82,600.

The decline was modest on Friday itself, but it capped a rough stretch that featured forced selling and a jolt to the companies that hold bitcoin on their balance sheets.

The liquidation wave

A roughly $1 billion liquidation wave hit crypto markets from Thursday into Friday, according to market reports. Liquidations occur when traders who borrowed to make leveraged bets are forced to close positions as prices move against them, which can accelerate a decline.

Reports differed on the trigger. One pointed to a hot consumer price report, while another cited a hotter-than-expected producer price reading. Both inflation reports this week came in above forecasts, briefly raising odds of another Federal Reserve rate hike.

The MSCI factor

Index provider MSCI (NYSE:MSCI) approved rules making "non-operating companies," those that mainly hold investments, ineligible for its Global Investable Market Indexes. Strategy (NASDAQ:MSTR), which holds 848,250 bitcoin, could be removed from MSCI's global indexes. The final list is due Nov 11, with changes taking effect after the Nov 30 close. Strategy shares tumbled to close at $136.72. A separate account described the rule differently, saying current members would be removed only after failing a screen in two consecutive annual filing periods.

Miners and risk appetite

Bitcoin miners fell sharply. Hut 8 (NASDAQ:HUT) dropped after on-chain data showed large bitcoin transfers to exchanges, and the WGMI crypto-miner ETF plunged. Riot Platforms (NASDAQ:RIOT) and TeraWulf (NASDAQ:WULF) also fell, while IREN (NASDAQ:IREN) and Cipher Digital (NASDAQ:CIFR) plunged amid the AI data-center selloff.

The broader market offered little support. The Nasdaq Composite slid 572.99 points to 26,140.03, capping its worst week since June, as investors questioned how AI spending will be financed. The S&P 500 fell 84.62 points to 7,659.44 and the Dow Jones Industrial Average lost 175.28 points to 52,002.41. The Cboe Volatility Index rose to 19.99 after touching 22.31 intraday, its highest since June 11.

Sentiment gauges were weak. The Fear & Greed Index stood at 30, in "Fear" territory.

Not every signal was negative. The dollar slipped against major currencies and Treasury yields eased, with the 10-year closing at roughly 5.1, conditions that can sometimes support alternative assets. Odds of an October Fed hike fell sharply after spiking on Wednesday. Circle Internet (NYSE:CRCL) is reportedly expanding into 40 emerging countries.

Bitcoin Awaits MSCI's Nov 11 List

The Fed's Oct 28 decision, followed by the PCE inflation report on Oct 29, could shift appetite for risk. Fed Chair Kevin Warsh has given no hints, saying, "I don't prejudge meetings." Big Tech earnings next week, including Meta Platforms (NASDAQ:META) and Tesla (NASDAQ:TSLA) on Oct 21, may also sway risk sentiment. Investors will also watch for signs of renewed leverage building up in crypto derivatives after the latest liquidations. Crypto traders will focus on MSCI's Nov 11 list and the Nov 30 effective date for index changes.