Bitcoin experienced a significant decline at the beginning of December, plummeting to as low as $85,400 early Monday morning. This represents a roughly 5% drop overnight, continuing a downward trend that has spanned six weeks, following its peak of $126,000 in late October. Since reaching this all-time high, Bitcoin has shed nearly one-third of its total value, attributed to extensive liquidations and sell-offs that characterized late October and November.
Despite a brief pause in selling that many hoped indicated a stabilization in the market, Monday’s decline has cast doubt on that optimism. Kathleen Brooks, the research director at trading firm XTB, pointed out that Bitcoin currently acts as a barometer for overall risk sentiment, implying that its downturn could negatively impact the stock market at the beginning of December. Brooks noted the absence of a clear catalyst for the drop but highlighted ongoing concerns among investors regarding an uncertain economic outlook. This uncertainty is further illustrated by recent VIX scores, which reflect market volatility.
Traders are closely monitoring upcoming economic data releases in the U.S. this week, especially with expectations for a potential interest rate cut from the Federal Reserve during its next meeting set for December 10. However, any unfavorable data regarding jobs or inflation could impact the pace and extent of future cuts, complicating market sentiment.
Sean McNulty, APAC derivatives trading lead at FalconX, remarked on the prevailing “risk-off” tone as December commenced. Market observers are particularly focused on the $80,000 mark for Bitcoin, viewing it as a critical support level amidst ongoing structural headwinds.
In addition to Bitcoin’s decline, other major cryptocurrencies also saw significant drops on Monday, with Ethereum and Solana each falling by more than 5%. The downturn occurs in conjunction with S&P Global Ratings’ recent downgrade of USDT, the world’s largest stablecoin, amid concerns that a further decline in Bitcoin’s value could compromise its collateral. Tether, the issuer of USDT, has publicly disagreed with S&P’s assessment.
