Bitcoin experienced a 4.5% price drop to $85,700 on December 16, 2025, amid rising open interest and leverage, leading to $652 million in liquidations. Ethereum saw higher liquidation volumes at $233.5 million, primarily from long positions, signaling a healthy market reset despite ongoing volatility.
-
Bitcoin’s decline was influenced by broader Asian market drops, including a 1.56% fall in the Nikkei 225.
-
Rising open interest since December 7 has increased leverage risks, contributing to cascading liquidations.
-
Exchange netflows show Bitcoin outflowing over the past month, with the market phase index at 0.38 indicating a transitional regime without strong recovery signals; data from CryptoQuant.
Bitcoin price drop to $85.7k on Dec 16, 2025: Explore causes, liquidations, and volatility risks. Stay informed on BTC trends for smarter trading decisions today.
What Caused the Bitcoin Price Drop on December 16, 2025?
Bitcoin price drop on December 16, 2025, stemmed from synchronized declines in Asian equities, with the cryptocurrency falling 4.5% to $85,700 in early trading. This movement aligned with a broader market capitalization reduction of 4.4%, though a slight rebound pushed it to $86,500 by press time. High-leverage positions amplified the downturn through liquidation cascades, as reported by CoinGlass.
How Are Rising Leverage and Open Interest Impacting Bitcoin Volatility?
The surge in Bitcoin’s open interest since December 7, 2025, despite price declines, points to heightened speculative activity. The estimated leverage ratio metric, which divides open interest by exchange reserves, spiked from December 10, indicating either increased positions or reduced Bitcoin holdings on exchanges. According to CryptoQuant data, this buildup has fueled volatility by enabling rapid liquidation events.
In the last 24 hours, $652 million in crypto positions were liquidated, with Ethereum surprisingly leading at $233.5 million—mostly $205.1 million in long positions—compared to Bitcoin’s $184.8 million. Analysts at XWIN Research Japan, via CryptoQuant Insights, explained that these were not driven by spot market selling but by leveraged trades hitting short-term support levels. Forced sales from liquidated longs create taker sell orders, triggering further cascades and resetting excessive leverage for potential spot-led stability.
Exchange netflows further support this, showing a seven-day moving average of Bitcoin outflows over the past month, which tightens supply and elevates the leverage ratio. Rising open interest amid falling prices suggests growing short-selling, raising the specter of liquidity hunts in either direction. This dynamic, per COINOTAG analysis, heightens short-term drawdown risks, with the $84,000 support level under pressure from both crypto-specific and macroeconomic factors.
Why BTC Prices Might See More Volatility
Source: CoinGlass
Since the 7th of December, the BTC Open Interest (OI) has been rising. Although it dipped in recent hours, the overall trend has remained upward throughout the past week.
Source: CryptoQuant
Similarly, the Estimated Leverage Ratio (ELR) metric also saw a sharp uptick from the 10th of December. The metric measures the exchange’s OI divided by its coin reserve.
The rapid uptick in ELR suggested more OI, or fewer BTC in Exchange Reserves, or both.
Source: CryptoQuant
COINOTAG analyzed the 7-day Moving Average of Exchange Netflows and confirmed that, on average, Bitcoin has been flowing out of exchanges over the past month. This trend helps explain the behavior of the ELR.
Meanwhile, rising OI despite falling price points to increased short-selling activity. It also raises the risk of sharp liquidity hunts in both directions, adding to potential volatility in the days ahead.
Concerns remain that the $84k local support may not hold, driven not only by volatility fears but by broader market pressures.
Source: Axel Adler
On-chain analyst Axel Adler noted that the market phase index remained in the 0.38 territory. This reads as a “preservation of the transitional regime“. The selling pressure has not intensified, but there has been no sustainable recovery either.
The indicator must pick up over the 0.43 level to signal market strength. Until then, traders and investors can maintain a bearish bias. This transitional state underscores the Bitcoin price volatility observed, where fear and uncertainty dominate, as measured by tools like the Crypto Fear & Greed Index hovering in neutral-to-fear zones. Broader economic indicators, including persistent inflation concerns and regulatory scrutiny on digital assets, add layers to this volatility, making it essential for investors to monitor on-chain metrics closely.
Frequently Asked Questions
What triggered the $652 million in crypto liquidations on December 16, 2025?
The liquidations were primarily triggered by Bitcoin’s 4.5% drop to $85,700, breaching key short-term support levels and activating high-leverage positions. CoinGlass data shows Ethereum led with $233.5 million in losses, mostly longs, creating a cascade effect. This event flushed out overleveraged traders, potentially paving the way for a more stable market.
Is the Bitcoin market in a recovery phase after the December 16 drop?
Currently, Bitcoin remains in a transitional regime, with the market phase index at 0.38 per Axel Adler’s analysis. While a minor rebound to $86,500 occurred, selling pressure persists without crossing the 0.43 threshold for strength. Investors should watch for sustained spot buying and reduced leverage to confirm recovery.
Key Takeaways
- Market-Wide Impact: The Bitcoin price drop mirrored Asian equity declines, with Nikkei 225 falling 1.56%, highlighting interconnected risks.
- Leverage Risks Amplified: Rising open interest and ELR since early December fueled $652 million in liquidations, mostly longs, signaling a necessary deleveraging.
- Monitor Supports: The $84,000 level faces tests; a break could extend volatility, while holding might enable spot-driven upside—track netflows for insights.
Conclusion
The Bitcoin price drop on December 16, 2025, exemplifies ongoing Bitcoin price volatility driven by leverage cascades and macroeconomic ties. With open interest climbing and netflows showing outflows, the market is resetting for potential stability, though the transitional phase persists. Investors should prioritize risk management and stay attuned to on-chain signals for informed decisions amid these dynamics.
