The cryptocurrency sector is facing significant selling pressure. On Tuesday, Bitcoin’s price dropped below the $86,200 threshold, marking a 24-hour decline of approximately 4%. At its lowest point, the digital asset traded at $85,578, a level not seen in a fortnight. This places Bitcoin roughly 30% below its all-time peak of over $126,000, recorded in October.
Macroeconomic Headwinds and a Key Central Bank Decision
A primary catalyst for the current market anxiety stems from Japan. Investors are closely watching the Bank of Japan, which is scheduled to announce an interest rate decision on December 18 or 19. Market participants are anticipating a potential rate hike, which would increase the cost of the “Yen Carry Trade.” This popular strategy involves borrowing cheap Japanese yen to fund investments in higher-risk assets, including cryptocurrencies. Tighter monetary policy in Japan could therefore constrain a source of capital for the crypto market.
Further unease is emanating from traditional equity markets, where concerns about overvaluation in the artificial intelligence sector are growing. Given Bitcoin’s increasing correlation with high-growth technology stocks, this uncertainty is spilling over into digital assets.
Leveraged Positions Unwind in Derivatives Market
The downward move has triggered substantial liquidations, particularly among leveraged traders. Across the cryptocurrency derivatives landscape, forced liquidations totaled around $584 million. The vast majority of these—$486 million—involved long positions, wiping out bullish bets. Losses specifically from Bitcoin futures and options amounted to roughly $174 million.
Other major tokens also faced steep declines, with Ethereum and XRP falling 6.8% and 5.7%, respectively. Broader market weakness is evident, as data from CoinDesk indicates that 75 of the top 100 cryptocurrencies are currently trading below their 50- and 200-day moving averages—a technical condition often associated with pronounced corrective periods.
Mining Network Shows Signs of Strain
Pressure is also visible in the network’s underlying infrastructure. Reports suggest approximately 400,000 mining rigs were powered down in China’s Xinjiang region. This contributed to an estimated 8% drop in the global network hashrate. While the Bitcoin network remains secure, the declining hashrate implies that smaller-scale miners are struggling to remain profitable at current price levels and are shutting down operations.
Should investors sell immediately? Or is it worth buying Bitcoin?
Institutional Sentiment Sends Mixed Messages
Institutional activity presents a contradictory picture. Spot Bitcoin exchange-traded funds (ETFs) recently experienced net outflows of $154.2 million. Notably, BlackRock’s iShares Bitcoin Trust alone has seen outflows exceeding $2.7 billion over the past five weeks, suggesting traditional finance investors are reducing exposure as the year ends.
In contrast, corporate buyer MicroStrategy has maintained its accumulation strategy, purchasing an additional $1 billion worth of Bitcoin. However, this buying activity proved insufficient to counterbalance the selling pressure from other large market participants.
Regulatory Landscape: Delays and Minor Relief
The path to comprehensive regulatory clarity in the United States has grown longer. The US Senate has postponed hearings on a major crypto regulatory bill until early 2026. The proposed legislation, intended to clarify jurisdictional boundaries between the CFTC and the SEC, failed to secure necessary majorities before the Christmas recess.
There are, however, some marginally positive developments. The Financial Stability Oversight Council removed crypto assets from its list of systemic financial risks in its 2025 annual report. Additionally, under the new administration, the SEC is reported to have paused or dismissed approximately 60% of its ongoing crypto-related enforcement cases.
Market Outlook: Fear Meets Long-Term Conviction
Current sentiment is deeply pessimistic, with the Fear & Greed Index registering a score of 16, deep in “Extreme Fear” territory. The analyst community is divided on the short-term path. Observers like Peter Brandt warn of potential for further declines, while technical analyses suggest a pessimistic scenario could even see support zones near $25,000 if macroeconomic conditions deteriorate.
Conversely, research firm Bernstein maintains a long-term bullish outlook, suggesting a price target of $150,000 by the end of 2026 is feasible. The coming days will be critical in determining whether the current downturn represents a consolidation before a move to new highs or the beginning of a more prolonged phase of weakness.
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