The cryptocurrency market experienced a sharp and synchronized downturn as December began, leaving Bitcoin [BTC] and Ethereum [ETH] holders grappling with sudden losses. This abrupt sell-off, marked by significant price drops and widespread liquidations, quickly erased days of market stability, raising questions about the underlying causes and immediate future outlook.
The Sudden Market Plunge and Widespread Liquidations
On the first day of December, both Bitcoin and Ethereum witnessed immediate hourly breakdowns. BTC plummeted from approximately $86,300 to nearly $85,000, continuing its descent towards $85,800, while ETH similarly slipped from around $2,825 to just above $2,806, before further dropping towards $2,820. This synchronized crash across major cryptocurrencies triggered massive liquidations, with traders absorbing a staggering $647.25 million in a 24-hour period. Long positions bore the brunt, accounting for $572.91 million of these liquidations, including over $201 million for BTC and $159 million for ETH, underscoring the intensity and widespread impact of the sudden market shift.
Unpacking the Contributing Factors
Several factors appear to have coalesced, contributing to this dramatic market correction. A notable cooling in demand for spot Exchange-Traded Funds (ETFs) for both Bitcoin and Ethereum was evident, with BTC ETFs registering only marginal net inflows after significant outflows, and ETH ETFs showing consistent negative flows. This reduced institutional demand signaled a weakening buying pressure. Concurrently, elevated whale activity across both BTC and ETH, characterized by frequent large transactions exceeding $1 million, indicated major holders were actively moving funds – a common precursor to increased market volatility. Adding to the sell-side pressure, Bitcoin’s exchange netflow saw substantial inflows, particularly a spike nearing -350K BTC, suggesting that more Bitcoin was being sent to exchanges, often a bearish signal coinciding with price weakness. These combined pressures likely fueled the rapid unwinding of long positions, setting the stage for potential continued volatility.
