Bitcoin’s Decline Below $86K: A Warning from Bloomberg Analysts

Bitcoin’s recent drop below $86,000 has raised alarms among analysts at Bloomberg Intelligence. Senior commodity analyst Mike McGlone has pointed out that this 7% decrease may merely be the start of a more severe bear market correction.

Key Takeaways

Bloomberg analysts predict Bitcoin's drop below $86,000 is just the beginning of a potential bear market.
A significant decrease in trading volumes and Bitcoin ETF outflows highlight concerning market trends.
The possible Bank of Japan interest rate hike and its implications are impacting Bitcoin's market structure.
Analysts warn that if key support levels fail, Bitcoin may retest prices around $60,000 to $65,000.

Bloomberg Analysts Warn Bitcoin's Slide Below $86K Is Just the Beginning

This cautious outlook emerges as the cryptocurrency markets endure their worst monthly decline since February 2023, with trading volumes plummeting to $1.59 trillion and Bitcoin exchange-traded funds (ETFs) experiencing $3.48 billion in net outflows just in November.

McGlone warns that Bitcoin could fall over 35% from its current position, potentially revisiting the $50,000 level last recorded in 2024. His analysis attributes this pessimistic forecast to several factors, including typical market reversion, record gold prices, low stock market volatility, and an endless supply of competing cryptocurrencies.

Bloomberg Analysts Warn Bitcoin's Slide Below $86K Is Just the Beginning

Yen Carry Trade Dynamics May Push Bitcoin Below $75K

The immediate reason for Bitcoin’s bearish trend seems connected to speculation surrounding an interest rate hike expected from the Bank of Japan (BOJ) in December. This speculation has impacted leveraged trading positions.

Currently, Polymarket bettors estimate a 52% chance for a 25-basis-point rate increase during the BOJ’s meeting on December 18-19, while bond investors suggest those odds are even higher at approximately 76%.

According to BitMEX co-founder Arthur Hayes, the drop in Bitcoin is linked to the BOJ's interest rate considerations. He has noted that the current USD/JPY exchange rate, estimated between 155 and 160, aligns with a more aggressive approach from the BOJ.

The yen carry trade represents a huge dimension of the market, with conservative estimates pegging its size at $3.4 trillion, although realistic numbers might approach $20 trillion. For years, global markets have utilized low-cost Japanese yen to invest in various financial instruments, including tech stocks and Bitcoin itself. This trend ended last month, triggering a significant market sell-off.

Traders are now becoming more cautious, seeking protective measures as market volatility persists. Observations from Glassnode show a considerable supply block hovering between $93,000 and $99,000, with another resistance zone between $101,000 and $105,000.

Bloomberg Analysts Warn Bitcoin's Slide Below $86K Is Just the Beginning

According to Laqira Protocol CEO Sina Osivand, “Every bounce into this zone is met with selling pressure from trapped buyers.” The current price range of $83,000 to $86,000 is emerging as a new baseline for fresh demand. If this level fails to hold, we may see liquidity shift down towards $78,000 to $75,000.

Analysts Suggest Bitcoin Could Approach $60-65K Support Levels

“Bitcoin’s fall below $90,000 results from a combination of the fragile market structure and low liquidity conditions observed over the weekend,” says Farzam Ehsani, CEO of VALR.

In addition, a potential decision by MSCI to exclude companies that hold significant amounts of cryptocurrency from its indexes has contributed to selling pressure. This change would impact companies collectively owning over $137 billion in digital assets, corresponding to about 5% of all existing Bitcoin.

Ehsani explains, “Rule changes necessitate a review of the holdings of index funds, which can lead to forced sell-offs.”

Upcoming market sentiment for December and the beginning of the New Year will, to some extent, depend on whether Michael Saylor’s company can strike an agreement with regulators and index firms.

Traders on Kalshi have drastically reduced the likelihood of Bitcoin reaching the $100,000 mark this year to just 29%.

Bloomberg Analysts Warn Bitcoin's Slide Below $86K Is Just the Beginning

Ehsani has cautioned that should the downtrend continue, Bitcoin might retest the $60,000 to $65,000 levels. He mentioned that major institutional investors might consider these levels as buying opportunities.

“Strategy is a significant player in the crypto market, and any challenges it faces could lead to Bitcoin prices dropping by an additional 30%,” he noted.

With the BOJ's policy decision on December 18 now serving as a critical turning point, a hawkish rate hike could bring Bitcoin closer to $75,000, while a pause might result in a swift recovery towards $100,000 within days.