Bitcoin Falls 33% From Its All-Time High – What’s Happening in the Crypto Market?

The cryptocurrency market has experienced a massive sell-off in recent days, wiping out tens of billions from the total market capitalization of the crypto market within a few hours. Bitcoin dropped to around $82,000 (€71,150), representing a decline of over 15% in the past week. Ethereum fell to $2,700 (€2,330), having lost roughly 15% over the seven days. A similarly negative trend is observed with XRP, which weakened to $1.90 (€1.65), with its weekly losses approaching 17%. As a result of the widespread selling pressure, the total cryptocurrency market capitalization decreased to approximately $2.87 trillion (€2.45 trillion).

Bitcoin’s movement sets the tone for the entire market. Its decline is caused by a combination of massive liquidations, profit-taking, and growing macroeconomic uncertainty. High trading volumes are visible in the market, indicating high investor nervousness. A drop below the $90,000 level triggered a series of automatic sell orders, which further deepened the sell-off and pulled down other major cryptocurrencies. Capital was rapidly moving into more stable assets, especially stablecoins, further increasing pressure on crypto assets.

What’s Actually Happening?

In recent days, the crypto market has plunged into a significantly negative mood, and Bitcoin has lost more than a third of its value from its all-time highs. Although crypto asset prices change rapidly, the current developments are not just about technical levels – it is a combination of macroeconomic factors, deteriorating sentiment in traditional markets, and events directly in the crypto space.

The first major impulse was a sharp change in sentiment on Wall Street. Thursday’s trading started with optimism after strong results from Nvidia, but sentiment reversed during the day. Technology stocks, including Nvidia, the S&P500, and Nasdaq, ended in losses. Bitcoin, which has long correlated with the tech sector, naturally mirrored this decline. This signaled growing investor nervousness, who began seeking lower risk.

Next, macro data worsened the situation. Additional data from the US labor market showed a higher number of new jobs than expected. This indicates that the US economy is still too strong for the Fed to cut interest rates in December. Higher rates traditionally push down the prices of tech stocks and cryptocurrencies because they reduce investors’ willingness to take on risk.

The negative sentiment was further deepened by large moves from crypto players. Owen Gunden, one of the wealthiest identified Bitcoin “whales,” according to data from the Arkham platform, gradually liquidated his entire Bitcoin portfolio worth over $1.3 billion. His last sale on a well-known crypto exchange triggered panic that significant long-term holders expect the arrival of a prolonged bearish phase.

The overall picture is complemented by massive outflows from US Bitcoin and Ethereum ETFs, showing that larger investors are currently withdrawing capital. Added to this is the CryptoQuant Bull Score, which fell into the most bearish zone of the cycle, confirming persistent fear.

The result is a combination of weakening liquidity, worsening macro conditions, and the exit of large players from the market – exactly the combination that has historically often extended correction periods.

Japan Adds Fuel to the Fire

While cryptocurrencies struggle with bearish sentiment and investor fear, the situation in Japan adds another dose of volatility to global financial markets. The Japanese yen fell to a 10-month low at 157.78 USD/JPY, and government bond yields reached record levels, raising borrowing costs and causing concern among both domestic and foreign investors.

The reason is the expected massive stimulus from new Prime Minister Sanae Takaichi, projected to be the largest since the COVID-19 pandemic. Her planned package of measures means further massive borrowing in the Japanese bond market, valued at more than one quadrillion yen ($7 trillion).

Yields on 10-year government bonds jumped 11 basis points to a 17-year high above 1.8%, while futures trading volume on these bonds reached a seven-month peak. Yields on 30-year bonds even rose to 3.36%. At the same time, insurance companies sold ultra-long bonds for the third consecutive month, with October alone seeing bond sales of 276.7 billion yen – the largest selling trend since 2004. Foreign investors also participated less, creating a situation where prices are determined by an increasingly volatile group of speculators.

Source: CNBC

The combination of rising yields, a weakening yen, and falling stocks is unusual for Japan and reflects growing uncertainty and structural shifts. The yen has detached from its usual close correlation with the interest rate differential between the US and Japan – losing about 6% in the seven weeks since Takaichi’s election victory, while the 10-year US-Japan rate gap narrowed by only 11 basis points.

For the Bank of Japan, the situation is complicated. If it continues buying bonds, it could weaken the yen further, but if it leaves the market free, yields and the state’s financing costs will continue to rise. This development also affects cryptocurrencies – the instability of the yen and Japanese bonds influences capital flows, which often correlate with the performance of Bitcoin and other digital assets.

Although foreign investors still buy stocks, direct bond purchases remain limited, while speculators gradually use the weak yen for so-called carry trades. The market sends a clear signal – Japan is currently a place of growing uncertainty, adding further pressure on the global investment environment and potentially supporting volatility in the crypto markets.

Uncertainty is Also Reflected in Bitcoin ETFs

November developments in the US crypto ETF market show that investor sentiment has changed significantly. Spot BTC and ETH ETFs listed in the US recorded record capital outflows – totaling $3.79 billion in November, surpassing the previous record of $3.56 billion from February. The largest share was from BlackRock Bitcoin ETF IBIT, which experienced outflows exceeding $2 billion this month alone, with up to $1.4 billion withdrawn from the IBIT fund in the last five trading days.

Ethereum ETFs also saw massive outflows – $1.79 billion – reflecting growing investor aversion to the two largest cryptocurrencies by market capitalization. Interestingly, despite investors withdrawing money from BTC and ETH, the latest Solana (SOL) and XRP ETFs experienced strong buying interest with net inflows of $300 million in November (SOL), indicating a shift of capital from traditional leaders to altcoins.

November developments show that investors are partially moving from traditional leaders like Bitcoin and Ethereum to altcoins, which may offer higher short-term returns. ETFs thus not only reflect sentiment but also actively shape capital flows in the market and influence cryptocurrency price dynamics.

The rapid decline in Bitcoin’s price caused the average US spot Bitcoin ETF investor to be briefly at a loss for the first time since these funds were launched, as Bitcoin briefly fell below $90,000. Data from Glassnode show that the average purchase price across all US Bitcoin ETFs is around $89,600, with Bitcoin dropping below this level for a short period on Tuesday.

Even though the current price is below the average cost basis, most holders are long-term investors according to Glassnode, so short-term losses did not lead to mass sell-offs. We will see if the coming days will show a change in the behavior of spot BTC and ETH ETFs.

Short-Term Holders Capitulation

On-chain data show that short-term holders (STH) are selling their BTC at significant losses. According to XWIN Research, the Short-Term Holder Spent Output Profit Ratio (STH-SOPR) dropped to approximately 0.97 and has remained below 1.0 for several weeks. This means that those who bought Bitcoin in recent months are selling at a loss, forming a so-called “capitulation band,” which historically has only appeared at significant turning points in Bitcoin cycles.

Similarly, the Short-Term Holder MVRV ratio fell well below 1.0, indicating that short-term holders are in deep loss and experiencing one of the weakest profitability phases. According to XWIN, more than 65,000 BTC were transferred to exchanges at a loss, clearly showing that fear is not just theoretical but manifested in real sales.

Source: x.com/QuintenFrancois

Interestingly, although short-term holders dominate daily market movements, long-term investors (LTH) are beginning to add selling pressure. Spent Transaction Output (STXO) data show that short-term holder flows remain high, but long-term holder flows have also increased – patterns that usually appear at market tops or during stress events.

Small BTC wallets sold about 0.36% of their holdings over five days, with similar sales observed for ETH and XRP, reflecting deep concern among retail investors. The Fear & Greed Index fell to a nine-month low, corresponding to levels seen during major panic sell-offs.

Nevertheless, there are also constructive signals: realized Bitcoin losses reached approximately -16%, a zone which in previous cycles preceded recoveries. Analysts also report record 30-day accumulation by long-term holders and fresh purchases by countries such as El Salvador, which bought up to 1,000 BTC during the decline.

Panic or Buying Opportunity?

Market panic often brings opportunities for those who can keep a cool head. Drops in Bitcoin and other cryptocurrencies may look frightening, but for long-term investors, they represent a chance to buy at prices that would seem unattainable in a calmer market. The key is to distinguish between short-term fluctuations and the fundamental value of assets – when others sell out of fear, a patient investor can profit from market recovery.

Take advantage of the crypto market dip and invest with Fumbi simply and safely today.

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