Bitcoin experienced a significant downturn recently, dropping below $85,000 for the first time since April. This decline is part of a broader trend that has accelerated since November, marking what appears to be the most drastic monthly drop since the cryptocurrency downturn of 2022. On Friday, Bitcoin briefly hit a low of $81,600 before recovering slightly to around $84,000. This plunge has erased all of its year-to-date gains, bringing the asset back to levels not seen since the surge that followed the excitement around exchange-traded fund (ETF) approvals in January.
The impact of this downturn is reverberating across the crypto market, with other major tokens also facing steep losses. Ethereum has seen its value drop below $2,750, reflecting a nearly 14% decrease over the past week. Other cryptocurrencies, including Solana, XRP, BNB, and Cardano, have recorded declines ranging from 8% to 15%. Altogether, major cryptocurrencies have fallen between 20% and 35% from their highs earlier in November, with smaller market caps suffering even greater setbacks.
This wave of selling has been exacerbated by approximately $2 billion in liquidations recorded in the last 24 hours, according to data from CoinGlass. Bitcoin alone accounted for nearly $964 million of that total, while Ethereum was responsible for another $407 million. The selling has forced around 396,000 traders out of their positions, with the largest liquidation being a Bitcoin position worth $36.7 million on the trading platform Hyperliquid.
Compounding the challenges within the cryptocurrency market, external economic factors are also putting pressure on investor sentiment. Global stock markets have struggled, suffering the worst week in seven months as concerns grow about inflated AI-driven valuations and the likelihood of the Federal Reserve cutting rates in December. The MSCI All Country World Index fell over 3% this week, while technology stocks in the U.S. faced continued pressure. In a classic sign of risk aversion, Treasuries have seen a rise in demand.
The state of capital flows specific to the cryptocurrency sector is also deteriorating. On Thursday, U.S.-listed Bitcoin ETFs experienced over $900 million in net outflows, marking one of the worst days since their inception in early 2024. Additionally, open interest in perpetual futures has decreased by 35% since reaching a peak of nearly $94 billion in October, which is further constricting market liquidity.
Retail investor sentiment reflects this bearish trend as well, with the Crypto Fear & Greed Index plunging to 11, indicating “extreme fear.” This marks the lowest sentiment reading since late 2022. Historically, such low levels have been precursors to significant price corrections, yet with Bitcoin breaking multi-month support and institutional interest waning, the market shows no immediate signs of stabilization.
