Cryptocurrency Market Faces Heavy Selling Pressure
This week started with some pretty rough selling across the crypto space. Bitcoin fell below $84,000 to trade around $84,113, marking an 8% daily decline. Ethereum didn’t fare much better, dropping below $2,800 to $2,743 with nearly a 10% loss in 24 hours.
What’s interesting, I think, is how these sharp moves triggered chain reactions in leveraged markets. When prices drop this quickly, it creates a sort of domino effect where positions get automatically closed out, which then pushes prices down further. It’s a cycle that can be hard to break once it starts.
Liquidations Reach Nearly $1 Billion
The numbers on liquidations are pretty striking. Total liquidations in the last 24 hours reached $934.64 million, which is one of the highest levels we’ve seen recently. Most of that—about $858 million—were long positions getting wiped out. Only around $76 million were short positions.
Even looking at shorter timeframes, the picture is intense. In just the last hour, $145.79 million in positions were liquidated. Over four hours, it was $326.24 million, and over twelve hours, $399.27 million.
Bitcoin led the way with $375.47 million in liquidations, followed by Ethereum at $223.11 million. Solana saw $46.36 million, and Zcash had $25.69 million closed out.
Altcoins Follow Bitcoin’s Decline
The selling pressure wasn’t limited to just Bitcoin and Ethereum. XRP fell to $2.01, down 8.04%. Binance Coin dropped to $813 with an 8.94% decline. Solana fell 9.23% to $125, while Dogecoin lost over 10% to $0.1342. Cardano was hit particularly hard, falling 10.72% to $0.3774.
Historically, December has been a decent month for Bitcoin, with average gains of 9.7%. But this year feels different. Experts are pointing to Bitcoin’s tighter correlation with traditional stocks lately. Shifts in overall risk appetite seem to be driving price behavior more than seasonal patterns.
Broader Market Factors at Play
Kathleen Brooks, research director at XTB, suggested Bitcoin might be acting as a leading indicator for overall risk appetite. She noted that the crypto market decline could have made stocks look weak at the start of the month. The drop in volatility is also making investors nervous—the VIX index falling below its 12-month average is creating uncertainty heading into year-end.
The outlook for CME Bitcoin futures is weakening too. The premium on three-month Bitcoin contracts has fallen to its lowest level in at least a year, which suggests investors’ appetite for long-term price appreciation is diminishing.
Jefferies strategist Mohit Kumar pointed to negative developments for several cryptocurrencies adding pressure on Bitcoin. Last week, S&P Global downgraded Tether’s stock price, citing rising proportions of high-risk assets in its reserves and “persistent gaps” in transparency. Tether strongly rejected this decision, but it still added pressure to the market.
Meanwhile, Phong Le, CEO of Strategy—the world’s largest institutional Bitcoin holder—mentioned the company could consider selling Bitcoin if its mNAV metric falls below 1. Currently, it stands at 1.19, but Strategy shares have lost 60% of their value over the past year, while Bitcoin has fallen only 13% during the same period.
This sharp decline also increases the risk of Strategy being removed from some indices. MSCI is completing its assessment this month regarding the removal of companies holding more than 50% of their total assets in digital assets from benchmark indices. Such a move could put additional pressure on both the company’s stock and its mNAV balance.
It’s worth remembering that crypto markets can be volatile, and what we’re seeing might be part of normal market cycles. But the scale of these liquidations and the broader market factors at play suggest this isn’t just typical volatility. Perhaps we’re seeing a shift in how investors view crypto assets as part of their overall portfolio strategy.
