Crypto Market Faces Downturn: Bitcoin and Ethereum Lead the Decline

Summary:
The cryptocurrency market is experiencing a significant decline as December begins, following a challenging couple of months. Major cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) have sharply fallen, contributing to a broader market slump. This article explores the causes of the downturn and its implications for the upcoming weeks.

Key Takeaways

Bitcoin and Ethereum have seen significant sell-offs, with Bitcoin dropping from over $89,000 to almost $86,000 in just an hour.
The total market capitalization of all cryptocurrencies has decreased from approximately $1.82 trillion to below $1.72 trillion.
Liquidations have surged, with Bitcoin liquidations exceeding $1.6 million and Ethereum’s reaching $847,000.
Thin liquidity and volatility in the market have exacerbated the situation, causing rapid declines.
Until liquidity improves, the market may continue to experience sudden price fluctuations.

Crypto Market Faces Downturn: Bitcoin and Ethereum Lead the Decline

Why is Crypto Experiencing a Downturn Today?

December 2025 has started poorly for the cryptocurrency market, continuing the trend from recent rough months. Major coins are seeing red, and traders are left pondering the reasons behind this downward spiral.

Both Bitcoin (BTC) and Ethereum (ETH) underwent a sudden sell-off as December kicked off. Bitcoin sharply fell from above $89,000 to nearly $86,000 within a single hour, while Ethereum experienced a similar drop, falling more than 5%.

As a result, the total crypto market capitalization plummeted from around $1.82 trillion to under $1.72 trillion, reaching its lowest point in weeks.

Market Impact Chart

The market charts reveal a swift, heavy sell-off followed by a brief and uncertain recovery.

Liquidations Surge as Bitcoin Leads the Sell-Off

The downward pressure has adversely affected derivatives traders. Up until press time, Bitcoin has accounted for over $1.6 million in liquidations, while Ethereum saw liquidations totaling around $847,000.

The market’s heatmap was predominantly red, with long positions being wiped out across leading cryptocurrencies such as Solana (SOL) and ZCash (ZEC). The only exceptions were smaller tokens like Pippin (PIPPIN), which managed to achieve modest gains amidst the volatility.

Thin Liquidity and High Volatility

Weak liquidity has been a key factor driving the recent price drop. The Kobeissi Letter highlights that weekend trading sessions have repeatedly led to exaggerated market movements throughout the year, and this latest sell-off adheres to that trend.

As order books become less filled and leverage approaches record highs, even minor selling pressure can result in a rapid cascade of losses. Bitcoin’s swift $4,000 plunge has triggered numerous forced liquidations, further accelerating declines across larger and mid-cap cryptocurrencies. Although the market has matured, it still exhibits structural vulnerabilities.

Until the liquidity situation improves, sporadic price movements are likely to continue dominating market actions.

Final Thoughts

As the crypto landscape evolves, understanding the reasons behind market fluctuations becomes essential for investors. Keeping an eye on liquidity and market sentiment can provide valuable insights into future movements.