Bitcoin dropped below $86,500 late Sunday, which caused the broad sell-off of the major cryptocurrencies. Besides the depressing macroeconomic situation, the investor confidence was also affected by the recents security concerns. The plunge came after the fast decline in just three hours from around $91,300 to nearly $87,000, thus wiping the asset’s five-day comeback above $90,000.
The Chainbull data indicates that Bitcoin was sold at $86,310 at about 11:40 p.m. local time, corresponding to a 24-hour 4.8% drop. The same trend was observed in ether, XRP, and Solana, with their prices down 5.36%, 6.39%, and 6.41%, respectively. The total global crypto market capitalization had decreased by more than $144 billion in only four hours.
Source: TradingView
The decline of BTC is associated with the investors who are trying to find their way through the inflation that refuses to go away, the worries about tariffs and the general uncertainty about the Federal Reserve’s decision on interest rates in the U.S. The CME Group’s FedWatch Tool indicates an 87.4% chance of a rate cut by 25 basis points in December but the analysts argue that the market had already taken that into consideration months ago.
Rachael Lucas, a crypto analyst at BTC Markets, claimed that traders’ positioning rather than the fundamentals is the main reason for the price action. She pointed out that the market had fully priced in the possibility of the Fed cutting rates in December during the rallies in September and October, hence almost no downside was left without a substantial liquidity injection in the risk assets.
Lucas brought it up as well that the interaction of persistent macro uncertainty and large Bitcoin ETF outflows has sped up an accelerated “classic deleveraging spiral.” In November, Bitcoin ETFs saw almost $3.5 billion going out, while in the middle of November, there were billions of leveraged long positions that were liquidated. The impact, according to her is that BTC is acting like “a high-beta risk asset” which can’t bounce back without having stronger liquidity scenarios.
The sell-off was further aggravated by the Yearn Finance hack that happened earlier in the day, wherein the attackers drained its yETH pool and sent 1,000 ETH to Tornado Cash. It is worth noting that the incident came after a major security breach at the South Korean exchange Upbit last week; hence, the market, which was already under pressure because of the recent leverage unwind and decrease in institutional flows, was gripped by fresh panic.
BTSE COO Jeff Mei argued that the anxiety of traders was escalares due to prominence of Yearn Finance as a major DeFi aggregrator, especially since it adjusts liquidity to platforms such as Aave, Curve, and Compund. He cautioned that if unstaking or withdrawals were to happen in large volume, it might spiral into a vicious circle of short-term selling pressure, thus Sunday’s trading would have seen a stronger drop.
According to Lucas, the very short-term support for Bitcoin is still around $87,000, which was holding for a short while during last night’s session. She mentioned $80,400 as the next important level with a chance of a liquidity sweep toward $75,000 if go down further. Some of the analysts opined that Bitcoin’s volatility is still very much dependent on ETF flow data, leveraged position, and incoming signals from the macro aspect.
Venture capital executives concurred with the same perspective, putting significant weight on the fact that macro clarity will be the main market driver in the near future. Boris Revsin from Tribe Capital pointed out that a market forecast on Fed policy becoming more dovish is far off the mark and that if the next Federal Reserve chair is a liquidity expansion advocate, the market would be surprised by how dovish the policy could be. On Sunday, President Donald Trump announced that he has made his choice for Fed Chair. Bloomberg, previously citing Kevin Hassett as the most likely candidate, had identified the leading contender.
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