Bitcoin experienced a short-lived rally to $90,000 before plummeting to $85,000, eroding trader confidence in a potential Santa rally. Market sentiment has shifted, with prediction platforms showing reduced odds of Bitcoin reaching $100,000 amid economic pressures and liquidity concerns.
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Bitcoin drops 2% to $85,921 after brief surge
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Prediction markets reflect declining faith, with Santa rally odds below 4%
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$155 million in Bitcoin derivatives liquidated, per CoinGlass data
Bitcoin’s failed rally to $90K and drop to $85K signals waning Santa rally hopes. Explore key factors like ETF outflows and rate hike fears driving this crypto price volatility. Stay informed on market shifts today.
What Caused Bitcoin’s Recent Price Drop from $90,000 to $85,000?
Bitcoin’s recent price drop from a brief high of $90,000 to around $85,000 stems primarily from shifting market sentiment and macroeconomic indicators. Early Wednesday’s rally hinted at a year-end Santa rally, but it reversed sharply due to liquidations and disappointing economic data. Traders on platforms like Myriad, a prediction market, now see only a 57% chance of Bitcoin hitting $100,000, down from 69% just a day prior, with Santa rally probabilities under 4%.
How Are ETF Outflows and Economic Data Impacting Bitcoin Prices?
Bitcoin ETF outflows have intensified the pressure on prices, with funds losing $634 million this week alone, according to data from Farside Investors. This follows two consecutive days of net withdrawals, signaling reduced institutional interest amid broader market uncertainty. The U.S. Bureau of Labor Statistics recently reported unemployment rising to its highest since 2021 over two months of jobs data, which rattled investors and contributed to Bitcoin’s volatility. Ethereum mirrored this trend, dropping 4% to $2,824 after briefly surpassing $3,000, and is now down 16% over the past week, leading losses among the top 10 cryptocurrencies by market capitalization.
Liquidations added to the downside, with $155 million in Bitcoin derivatives contracts wiped out in the last 24 hours, as tracked by CoinGlass. Bitcoin touched a low of $85,373 during the session, reflecting heightened leverage risks in a risk-off environment. Other major assets followed suit, posting sharper declines after initial gains, underscoring the interconnected nature of the crypto market.
Global liquidity concerns are also at play. Traders are preparing for a potential Bank of Japan rate hike on Friday, which could unwind the yen carry trade—a strategy that has long provided liquidity to risk assets like Bitcoin. Historically, such trades fuel rallies by borrowing cheap yen to invest in higher-yield assets, but a reversal might dry up dollar flows into cryptocurrencies and equities, exacerbating price drops.
Frequently Asked Questions
What Is the Current Outlook for Bitcoin’s Santa Rally in 2024?
The outlook for Bitcoin’s Santa rally has dimmed significantly, with prediction markets like Myriad showing less than 4% odds of a year-end surge. This follows the recent price drop to $85,000 and ongoing ETF outflows, though some analysts remain cautiously optimistic if macroeconomic data improves.
Will the Bank of Japan Rate Hike Affect Bitcoin Prices?
A Bank of Japan rate hike could introduce short-term downward pressure on Bitcoin prices by disrupting the yen carry trade and reducing global liquidity. However, Bitwise Chief Investment Officer Matt Hougan notes that the move is fully anticipated, limiting long-term volatility, though headlines might trigger temporary sell-offs in the current environment.
Key Takeaways
- Market Sentiment Shift: Prediction markets indicate fading confidence, with Bitcoin’s $100,000 odds at 57% and Santa rally chances under 4%.
- Liquidation Impact: $155 million in derivatives liquidated highlights leverage risks amid the 2% daily drop to $85,921, per CoinGecko.
- Macroeconomic Pressures: ETF outflows of $634 million and rising U.S. unemployment signal caution; monitor Bank of Japan decisions for further volatility.
Conclusion
Bitcoin’s price drop from $90,000 to $85,000 underscores the fragility of recent rally hopes, driven by ETF outflows, economic data from the U.S. Bureau of Labor Statistics, and looming Bank of Japan policy shifts. While expert insights from figures like Matt Hougan at Bitwise suggest contained volatility, the broader crypto market volatility persists. Investors should stay vigilant as year-end dynamics unfold, potentially setting the stage for renewed momentum in 2025 if liquidity stabilizes.
