If you invest in crypto or follow its daily movements, today was a bit of a shock. During Friday’s trading in Asian markets, the crypto market deepened its month-long decline. Bitcoin, which had shown a strong rally at the beginning of the year, now appears to be slowly losing momentum.
Bitcoin’s Sharp Drop Below $86,000 for the First Time
Bitcoin, the market’s largest cryptocurrency, slipped 2.1% today, falling below $86,000 for the first time since April. It appears that both the market’s lack of new buyers and the previous bullish momentum are now on the verge of fizzling out. Fast traders who were buying heavily during the rally are now steadily cutting positions, further increasing market pressure.
Heavy selling by whales deepened the decline.
According to James Butterfill, head of research at CoinShares, whales, or large investors, are selling heavily, in keeping with a four-year cycle. He explains that large holders have sold over $20 billion since September, further weakening the market. While he disagrees with this cyclical theory, the market is currently in a “self-fulfilling” mode.
Weakness in AI stocks and Fed fears also put pressure on crypto.
On the other hand, volatility persists in the US stock market. The AI sector had regained momentum after Nvidia’s strong results, but Wall Street has come under pressure again due to expensive valuations and doubts about a rate cut in December. Crypto is currently trapped in its own leveraged world, where retail demand continues to decline.
$85,000 and $82,000 become key levels for option traders, cautious
With the market declining, options traders are now paying close attention to the $85,000 level. According to Deribit options data, this level is the most in demand for downside protection. After this, $82,000 is considered the second key level, indicating that the market remains weak.
The pain of the October Liquidation Crash remains
This Bitcoin drop is not unlike the major incident in October, when $19 billion in leveraged positions were forcibly closed in a single day. That incident disrupted market liquidity, and order books have not been strengthened to date. Consequently, even a small amount of selling is enough to push prices down.
Uncertainty over Fed policy further weakened risk assets.
Jake Ostrovskis, head of trading at Wintermute, says there’s no clear indication of the Federal Reserve’s policy direction. The lack of data makes policy unclear, leading investors to avoid taking risks. This impact is primarily seen in high-risk assets like crypto.
Frequently Asked Questions
Why did Bitcoin suddenly fall?
Heavy selling by whales, the impact of liquidation, and a lack of new buyers are the main reasons for this.
Is Fed policy affecting crypto?
Yes, uncertainty over interest rates is reducing investors’ risk appetite.
Is the impact of the October crash still lingering?
Yes, the market is still weak due to the liquidity breakdown at that time.
Could Bitcoin fall further?
The options market is considering $85,000 and $82,000 as key supports.
Disclaimer: This article is for informational and analytical purposes only. Do not construe it as financial advice. The crypto market is highly volatile. Consult your financial advisor before investing.
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