Bitcoin Price Drops to $85K: What's Next for BTC in December?

Summary:
Bitcoin has recently experienced a significant decline, falling to approximately $85,500. This drop is linked to rising expectations of a potential rate hike by the Bank of Japan in mid-December. The broader cryptocurrency market has also seen a notable correction, resulting in substantial liquidations of long positions.

Key Takeaways:

Bitcoin has decreased by 5% to nearly $85,000 during a marketwide correction, resulting in a liquidation of $656 million in long positions.
The anticipation of a Bank of Japan (BOJ) rate hike during its December 18-19 meeting has negatively impacted Bitcoin's price.
Technical indicators suggest Bitcoin could potentially drop to around $67,700.

Bitcoin price slides to $85K: How low can BTC go in December?

Bitcoin Suffers Major Pullback

Bitcoin's price plummeted to as low as $85,616 on Monday, marking a 5.5% decrease over the past 24 hours amid a general market retreat. This decline continues a trend from its all-time high of $126,000 on October 6, representing a 32% decline. The downturn was accompanied by massive liquidations across the crypto derivatives market.

BTC/USD hourly chart. Source: Cointelegraph/_TradingView

More than $564.3 million in long positions were liquidated, with Bitcoin accounting for $188.5 million of that figure. Additionally, Ethereum saw $139.6 million in long liquidations. In total, about $641 million was erased from the market due to both short and long position liquidations, as depicted in the following figure.

Crypto liquidations (screenshot). Source: CoinGlass_

Several analysts link the recent downturn to growing expectations regarding a BOJ rate hike at the meeting on December 18-19. This potential change, marking Japan's first tightening since January, has raised concerns about the unwinding of the significant yen carry trade, putting pressure on risk assets, including cryptocurrencies.

"Bitcoin dropped because the BOJ put a rate hike on the table for December," stated BitMEX co-founder Arthur Hayes in a post on X, noting that a USD/JPY rate between 155 and 160 indicates a hawkish BOJ stance.

BTC/JPY chart. Source: Arthur Hayes_

Japanese yields are rising, with two-year yields reaching their highest level since 2008. The yen has also been strengthening, as noted by Nic, co-founder and CEO of Coinbureau, in his recent X post.

Consequently, bond investors are placing a 76% chance on a BOJ rate hike at the December 19 meeting, with a Reuters poll indicating that 53% of economists expect a hike. This marks an increase in expectations compared to earlier months, driven by risks associated with imported inflation and decreasing political pressure for easing.

A stronger yen, resulting from higher rates, makes carry trades more expensive, prompting investors to unwind their positions. This activity can lead to the sale of risk assets, reminiscent of the surprise BOJ rate hike in August 2024 that triggered a 20% Bitcoin price drop to $49,000, resulting in $1.7 billion in liquidations.

Future Outlook for Bitcoin's Price

The Bitcoin liquidation heatmap indicates the price is consuming liquidity around $86,000, with significant bid orders still present between the current price and $79,600.

BTC/USDT liquidation heatmap. Source: CoinGlass_

This performance suggests that Bitcoin's price might dip further to eliminate this liquidity before any potential recovery can take place. From a technical standpoint, the price has confirmed a bear flag on the daily chart after dipping below the lower boundary of the flag at $90,300 on Monday.

A daily close below this threshold would affirm the continuation of the downtrend toward a target set by the flag at $67,700 (approaching the 2021 all-time highs). Such a decline could lead to overall losses of 21%.

BTC/USD daily chart. Source: Cointelegraph/_TradingView

Veteran trader Peter Brandt has shared charts indicating that Bitcoin's macro downtrend may find support in the lower green zone between $45,000 and $70,000.

"Not to rain on anyone's parade, but the upper limit of the lower green zone starts in the sub-$70,000 range, with support at the lower boundary in the mid-$40,000s," stated Brandt.

As previously reported by Cointelegraph, Bitcoin has been mirroring the trajectory of the 2022 bear market. Currently, there is a nearly 100% correlation in 2025. If this trend persists, a true rebound in Bitcoin's price may not materialize until well into the first quarter of next year.