Bitcoin saw a sharp decline below $90,000 during the Asian session, marking the lowest value in five days. The price plummeted sharply after recording a local peak of $91,570 within 24 hours. Market participants felt the impact of repeated resistance rejections throughout December. This movement, combined with deepening losses in altcoins and poor liquidity conditions, presented a picture of significantly reduced risk appetite in the cryptocurrency market.
Resistance Challenges and Macro Economic Impact
Since the beginning of last month, Bitcoin has failed to breach the $94,500 mark for the third time. The recent pullback mirrors the price behavior of the last six weeks, solidifying a trading range between $85,000 and $94,500. This band acts as a relative equilibrium zone, following a drastic pullback from a record $126,220 on October 6 to $80,600 on November 21.
On the macroeconomic front, a decline in US futures and a more than 1% rise in the dollar index since December 24 further dampened appetite for risky assets. Intra-day losses in Nasdaq 100 and S&P 500 futures indicated that the sales observed in the crypto market were not solely driven by local dynamics. The dollar’s strengthening particularly pressured leveraged positions, increasing volatility.
Altcoins, Derivatives, and Liquidity Crunch
The altcoin market experienced sharper losses due to low trading volumes. Privacy-focused coins like Zcash fell by over 16% from midnight to the morning, and coins like PUMP and DASH recorded double-digit declines. The DeFi index and memecoin index underperformed the broader market, signaling a retreat of capital from speculative areas.
On the derivatives side, there were liquidations exceeding $400 million in 24 hours, with most occurring in long positions. The total open position size decreased from a peak of over $141 billion to $140 billion. In Bitcoin futures, a modest increase and positive funding rates suggested a search for buying opportunities at the dip. In contrast, a drop in open positions in ETH, SOL, XRP, ZEC, and SUI contracts confirmed capital outflows from altcoins.
In the options market, while short-term downward risk perceptions weakened, put contracts continued to trade at a premium, maintaining a cautious stance. The liquidity contraction caused by a $19 billion derivatives position liquidation at the beginning of October led to large, isolated trades significantly affecting prices. A $12 million long position liquidation in Zcash intensified losses compared to the broader market due to order book inadequacies.
