Crypto Downturn Accelerates as BTC and ETH Break Key Levels
The bears persist in dominating the crypto markets as leading digital tokens have entered the final month of the year on a downturn. Bitcoin has fallen below $86,000, and Ethereum has dipped under $2,900, indicating a growing risk-off sentiment among investors. The recent sell-off continues the trend of the post-October correction, with Bitcoin experiencing a decline of approximately 32 percent from its peak of $126,198, while Ethereum has dropped 42 percent from its August high of $4,953. Altcoins followed suit, as Solana, XRP, and Ethereum each experienced declines of 5 to 6 percent, indicating a cautious sentiment permeating the wider digital asset market. The recent declines come on the heels of a weekend sell-off that erased hundreds of millions in leveraged positions, leaving traders in a frantic search for cover. Enhance your market strategies with The Smart Investor. Get daily insights on trending stocks and actionable information to steer your investment choices, all conveniently delivered to your inbox.
Significantly, the flagship token experienced a decline of nearly 5 per cent on Sunday, as it struggled to surpass crucial resistance levels, leading to substantial liquidations. In a dramatic turn of events, more than 180,000 traders faced liquidation in just 24 hours, with total liquidations soaring to $539 million, primarily affecting long positions in BTC and ETH, as per reports. The cryptocurrency momentarily surged back to the $86,000 threshold but ultimately experienced a decline of over 5 per cent on Monday. As of now, Bitcoin is trading at $86,280.76, reflecting a decline of 5.18 percent in the last 24 hours, with a trading volume of $60.41 billion. Throughout the session, the leading token fluctuated between $85,653 and $91,965, according to data. Ethereum reflected this downturn, declining approximately 6 percent to $2,830 with a 24-hour trading volume of $20.72 billion, after oscillating between $2,807 and $3,051.
Analysts point to the ongoing fragile sentiment as a key factor behind the sell-off, which follows the token’s November loss that occurred after an impressive rally in October, during which it reached new heights. “The move had no single catalyst but exposed how fragile sentiment remains after Bitcoin’s November loss. The dip can be attributed to a cascade of leveraged unwinds during thin weekend liquidity, rather than a fundamental shift in demand. Structurally, this remains a deleveraging phase: funding rates remain stretched, ETF flows show institutional caution, and retail positioning is still chasing rebounds. Yet, the swift absorption near $87,000 also shows that long-term holders and ETF cost-basis buyers around $82K continue to anchor support even amid volatility,” said Vikram Subburaj, however, asserts that macro conditions could swiftly change the narrative. On December 1, the US Federal Reserve officially concluded Quantitative Tightening, stabilizing its balance sheet at $6.57T. This move signifies a liquidity pivot reminiscent of the cycle bottom observed in 2019. Policy rates have been reduced to a range of 3.75–4.0 percent, and the Standing Repo Facility has been established as a permanent component.
“Hence, up to $95B in monthly liquidity could re-enter markets and potentially ease pressure on risk assets. The Fed’s decision comes amid weak data visibility after a 43-day government shutdown and a divided committee on inflation risks. Crypto markets historically respond with a lag to such liquidity turns, suggesting December could set the tone for a cautious recovery phase if macro conditions stabilise,” stated Subburaj. Some analysts, however, suggest that the ongoing sell-off seems more akin to a leverage flush-out rather than a fundamental breakdown. Riya Sehgal warned that Bitcoin’s drop below $87,000 has heightened bearish momentum, with the asset declining more than 5 percent in the last 24 hours during a widespread market sell-off. Total crypto market capitalisation has decreased by 4.4 per cent, now standing at $2.94 trillion. In contrast, trading volumes surged by 38 per cent, indicative of panic-driven liquidations, with over $300 million in leveraged longs being liquidated. “The break below key technical support near $89,500 has shifted Bitcoin’s short-term outlook toward further downside, with potential retests of $85,500 or even $82,000 if selling persists,” said Sehgal. She maintains that, from a structural perspective, this situation resembles more of a leverage flush-out rather than a fundamental breakdown. “Once excess leverage clears, Bitcoin could stabilise and attempt to reclaim the $90,000–$92,000 zone in the sessions ahead,” stated Sehgal. Despite these challenges, analysts suggest that macro liquidity resulting from the Fed’s pivot could serve as a stabilizing force if capital rotation shifts back toward large-cap cryptocurrencies.
