Bitcoin’s price has dipped below $90,000 this week, driven by a confluence of liquidation pressures, weakening demand for exchange-traded funds (ETFs), and uncertainties in the macroeconomic landscape. This downturn has erased recent gains that had attempted to bring the cryptocurrency back into a previous trading range of $94,000 to $95,000, marking the second significant decline within the month.
A significant factor contributing to this drop was a wave of forced liquidations across the market. In total, nearly $500 million was lost across various exchanges, including approximately $420 million attributed to liquidated long positions. In a 24-hour period, over 140,000 traders were forced out of their positions. This wave of liquidations underscored the volatility that has gripped the market in recent days.
Furthermore, ETF flows have not provided the necessary support for prices. BlackRock’s iShares Bitcoin Trust experienced six consecutive weeks of outflows, accumulating losses exceeding $2.8 billion. On December 3, inflows into U.S. Bitcoin ETFs plummeted to just $59 million, signaling a decline in institutional interest, further corroborated by reports showing outflows nearing $195 million for Bitcoin ETFs on December 4.
Amid these developments, macroeconomic factors added to the pressure. The Bank of Japan hinted at a possible interest rate hike, creating apprehensions about carry-trade liquidity which has been vital for maintaining global risk asset support. Additionally, many traders adopted a cautious stance leading up to the release of the U.S. Personal Consumption Expenditures (PCE) inflation data, which resulted in Bitcoin oscillating within the $91,000 to $95,000 range.
There was a brief spike in Bitcoin’s value following the release of PCE data, which came in lower than expected, causing a rise of $1,500. However, this surge was short-lived, with prices crashing by $3,500 just an hour later, ultimately wiping out $155 million worth of long positions during that timeframe. Analysts noted that no negative news or sudden fear, uncertainty, and doubt (FUD) seemed to trigger the rapid price drop, attributing it instead to factors such as excessive leverage and thin market liquidity.
Corporate signals have also contributed to a heightened sense of anxiety within the market. MicroStrategy issued a warning about potentially selling Bitcoin if its treasury valuation weakens, causing a notable 10% dip in its stock price. In the mining sector, increased energy costs and a falling hashrate have pressured high-cost operators to sell Bitcoin to maintain solvency.
On-chain analysis depicted a mixed sentiment among investors. While some large holders are moving substantial amounts of Bitcoin from exchanges to cold storage—highlighting accumulation strategies by long-term investors—analysts estimate that about a quarter of cycling Bitcoin supply is currently “underwater” at these price levels.
Debates among traders on social media explored whether the market dynamics were a natural occurrence or indicative of manipulation. Many market analysts attributed the volatility to excess leverage and macro hedging rather than any coordinated effort to influence prices. Nevertheless, there remains a degree of long-term optimism, with some experts, such as those from JPMorgan, suggesting a price model projecting Bitcoin could reach $170,000 by 2026.
As Bitcoin hovers around critical pivot points, the market faces potential vulnerability, especially with liquidation clusters forming between $90,000 and $86,000. A renewal of ETF inflows or a lessening of macroeconomic pressures could be key to stabilizing prices. For a solid recovery momentum to be confirmed, traders are eyeing a significant return above the $96,000 to $106,000 range. In the meantime, volatility remains the prevailing narrative, with traders closely monitoring for the next significant directional move.
