Bitcoin has endured its sharpest drop since March as December trading opened, with prices retreating amid sustained market volatility.
The cryptocurrency fell about 6% to around $85,900 by late Monday, while ether decreased roughly 8.4% to hit $2,776. Solana also dropped over 9%, showing broad weakness across major digital assets.
Much of the selling pressure was due to algorithmic liquidations triggered by monthly trading cycles, which pushed prices below key levels between $90,000 and $86,000, tightening liquidity.
Market watchers now face a critical test of whether Bitcoin can maintain support at around $86,000, as further declines toward $83,000 could occur if this level fails. Conversely, a recovery above this threshold may prompt a bounce back toward the $91,000 to $93,000 range.
The wider economic backdrop has also unsettled investors. Speculation over a Bank of Japan rate hike—the first in nearly a year—has rattled risk assets, including cryptocurrencies, by threatening the carry trades that bolster them. This contributed to liquidations of long Bitcoin bets worth hundreds of millions.
Ben Emons, founder and CIO of Fedwatch Advisors, shared ongoing concerns over Bitcoin’s trading leverage, noting, “There is still a lot of leverage in bitcoin out there. We can expect to some more of these liquidations if bitcoin prices don’t get off the lows from here.”
He also emphasised that retail investors dominate the crypto market and tend to behave differently from institutions, heightening volatility.
Additional pressure stems from uncertainties about U.S. monetary policy and questions over lofty valuations in technology sectors, which have spilled into the crypto market. Zach Pandl of Grayscale pointed to declining speculative interest and muted trading volume as indicators of reduced risk appetite.
Historically, December has been a challenging month for Bitcoin, and the confluence of technical selling and macroeconomic headwinds suggests the potential for more near-term downside before a meaningful rebound. Investors remain cautious as the market navigates this precarious phase.