Bitcoin fell to $83,824, widening the correction that started at the beginning of October to almost -30%. Ether also fell 10% to $2,719, losing 36% in seven weeks. The sales have especially hit smaller, illiquid tokens, with the MarketVector index of smaller digital assets down 70% since the beginning of the year. The market remains fragile after the huge $19 billion liquidation on October 10, triggered while Donald Trump agitated the markets with threats of higher duties, a few days after the historical record of the BTC at $126,251.
Macro risk on the rise
The October “liquidation cascade” highlighted the opacity of the leverage data, furthermore “it is a strong risk aversion start to December”, explains Filippo Diodovich, Senior Market Strategist of IG Italia, underlining “the general weakness of the markets” and “one of the most marked daily declines of the last month”. Diodovich warns that the market could remain “bumpy” as volatility reflects rate uncertainty and “disengagement from speculative assets.” The recent rebound towards $92,000 shows “how sensitive the BTC remains to the dynamics of the financial markets”.
New fronts of vulnerability
Investors are watching the Fed’s trajectory: expectations of a rate cut in December have risen again, but outflows from spot ETFs continue to squeeze liquidity. Meanwhile, Donald Trump has chosen the next Fed chair, fueling uncertainty about a possible more accommodative approach. On the corporate front, Strategy (formerly MicroStrategy) has created a 1.4 billion reserve to guarantee dividends and interest, attempting to curb fears that it may be forced to sell part of its 56 billion Bitcoin. Its mNAV fell to 1.11, close to the critical threshold. The stock has lost more than 10%, now down 66% from its 2024 peak.
Pressures on stablecoins and market prospects
US spot ETFs took in just $70 million in the past week, after $4.6 billion in outflows in the month. S&P downgraded the USDT stablecoin’s stability rating to its lowest level, warning that a further decline in BTC could make it undercollateralized. The PBoC has also warned about the risks of virtual currencies. According to Diodovich, the crypto market remains weighed down by “deleveraging, prudence on risk and growing integration with traditional markets”, factors that amplify the downside. A possible rebound will depend on macro data, institutional flows and the return of confidence in risky assets.
