Bitcoin fell 8% to under $84,000 triggering nearly $1 billion in leveraged liquidations across the crypto market.
- ETF demand has evaporated with the iShares Bitcoin Trust seeing five consecutive weeks of investor withdrawals.
- Strategy Inc. established a $1.4 billion reserve to prevent a forced selloff of its Bitcoin holdings as its stock price crumbles.
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| Photo by Thought Catalog on Unsplash |
The cryptocurrency market endured a brutal start to December as a fresh wave of selling pressure triggered a massive liquidation event. Nearly $1 billion in leveraged positions evaporated on Monday alone. This latest flush sent Bitcoin tumbling as much as 8% to hit a low of $83,824. The world’s largest digital asset has now surrendered almost 30% of its value since its early October peak. The pain was even more acute for Ether which dropped 10% to trade near $2,719.
This downturn is not an isolated incident but rather the continuation of a painful deleveraging cycle. The trouble began in earnest back in early October when President Donald Trump’s tariff threats whipped the markets into a frenzy. That volatility wiped out $19 billion in speculative bets just days after Bitcoin had touched an all time high of $126,251. Since then the market has been on shaky ground. Smaller and less liquid tokens have been decimated with one index tracking the bottom half of the top 100 digital assets crashing nearly 70% this year.
The current selloff is being driven by a lack of new money entering the space. Bitcoin ETFs which were once the darling of Wall Street are seeing demand dry up. The iShares Bitcoin Trust has recorded five straight weeks of outflows marking its longest losing streak since launch. Analysts at FalconX note that the absence of "dip buyers" is a major red flag. They are now watching the $80,000 mark as the next critical line in the sand. If Bitcoin falls below that level the structural damage could worsen significantly.
Corporate heavyweights are scrambling to shore up confidence. Strategy Inc. (MicroStrategy) announced the creation of a $1.4 billion reserve to cover future dividend and interest payments. This move is a direct attempt to calm fears that the company might be forced to sell off parts of its massive $56 billion Bitcoin hoard. Investors have been anxious about the company's "mNAV" metric which compares its enterprise value to its Bitcoin holdings. CEO Phong Le previously admitted that selling Bitcoin would be a last resort if this metric turned negative. The company’s stock has plummeted 66% since November 2024 reflecting deep investor skepticism.
Global macroeconomic shifts are adding fuel to the fire. In Japan the central bank is signaling a rate hike which strengthens the yen and pressures risk assets globally. Meanwhile in the US traders are trying to decipher the Federal Reserve’s next move. While odds for a December rate cut have improved the uncertainty is keeping capital on the sidelines. President Trump’s upcoming nomination for the next Fed chair adds another layer of unpredictability to the mix as he pushes hard for lower interest rates.
Regulatory clouds are also darkening the horizon. S&P Global Ratings recently downgraded USDT which is the world’s most important stablecoin to its lowest stability assessment. They warned that a crashing Bitcoin price could leave the token undercollateralized. Simultaneously the People’s Bank of China issued a fresh warning about virtual currencies and vowed to crack down on illegal activities. These twin threats from East and West are weighing heavily on sentiment.
Despite the gloom some traders see a potential floor approaching. Karim Dandashy of Flowdesk suggests there may be "light at the end of the tunnel" if economic data stabilizes. The hope is that once the interest rate picture clears up a year end risk rally could materialize. But for now the market remains in a precarious position where leverage is being punished and cash is king.