Why Bitcoin Recently Dropped Below $90,000: A Look at the Sell-Off

Bitcoin dipped below the $90,000 mark this week due to a combination of liquidation pressures, weak demand for ETFs, and uncertain macroeconomic conditions. This decline erased earlier gains that had seen prices attempting to reclaim the $94,000–$95,000 range, marking the second significant drop this month.

Key Takeaways

Bitcoin dropped below $90,000 due to forced liquidations and weak ETF demand.
Nearly $500 million was lost in forced long liquidations, affecting over 140,000 traders.
Macro pressures, including a potential rate hike from the Bank of Japan and cautious trading ahead of U.S. inflation data, contributed to the decline.
Mixed market sentiments show both fear and pockets of optimism, with some traders viewing the price movement as manipulated while others point to long-term forecasts.

Forced Liquidations Shake the Market

The primary driver behind Bitcoin’s recent fall was a wave of forced long liquidations. Approximately $500 million was lost across various exchanges, with about $420 million coming from long positions and over 140,000 traders facing liquidation within just 24 hours.

Crypto Liquidations Today. Source: CoinGlass

While the market struggled with these sell-offs, ETF flows did not provide much relief. BlackRock’s iShares Bitcoin Trust experienced six consecutive weeks of outflows, totaling more than $2.8 billion. On December 3, U.S. Bitcoin ETF inflows dropped to a mere $59 million, indicating a dwindling interest from institutional investors.

US ETF inflows fell to just $59 million. Source: SoSoValue

Macro Pressures Intensify the Decline

The broader economic landscape became more challenging. The Bank of Japan hinted at a potential rate increase, which could threaten the liquidity essential for supporting global risk assets. In anticipation of the U.S. PCE inflation report, traders sought to reduce their risk exposure, keeping Bitcoin's price in a cautious range between $91,000 and $95,000.

There was a brief surge when Bitcoin rose $1,500 following lower-than-expected PCE data, but it quickly plummeted by $3,500 within an hour, wiping out $155 million in long positions.

Bitcoin volatility illustration

The recently released U.S. PCE data aligned closely with expectations, showing a decrease in core inflation but still above the Federal Reserve’s target level. Markets reacted with caution, interpreting this as a sign that inflation is easing, albeit not quickly enough to lead to immediate rate cuts.

Corporate news added to the anxiety when MicroStrategy indicated it might sell Bitcoin if its treasury-valuation ratio worsened, leading to a 10% drop in its stock price. Miners faced increased stress due to rising energy costs, falling hash rates, and high-cost operators beginning to liquidate their BTC holdings to stay afloat.

On-chain data illustrated mixed market sentiment. Matrixport transferred more than 3,800 BTC from Binance to cold storage, indicating an accumulation trend among long-term holders. However, analysts estimate that around 25% of the circulating Bitcoin supply is currently "underwater" at existing price levels.

Matrixport with withdrawn BTC

Community Sentiment: Fear Mixed with Optimism

Traders across social media platforms engaged in discussions about whether the recent price movements were organic or manipulated. Many market analysts attributed the volatility to excessive leverage, thin liquidity, and macro-hedging, rather than targeted price interventions.

Conversely, some maintained a long-term optimistic outlook, referencing JPMorgan’s new $170,000 price target for Bitcoin by 2026. Presently, Bitcoin trades at a crucial juncture, with liquidation clusters forming between $90,000 and $86,000, putting the market at risk without renewed ETF inflows or easing macroeconomic pressures.

To regain recovery momentum, Bitcoin would need to rise above the $96,000–$106,000 range. For now, volatility reigns supreme, as Bitcoin experiences ups and downs, and traders remain vigilant for what the next major price movement will be.