Why Did Bitcoin’s Price Drop? Here Are 4 Reasons

The cryptocurrency market opened the final month of the year on a negative note. Bitcoin has fallen below $84,000 today, down nearly 32% from its all-time high of $126,200 in early October.

Selling pressure has also been heavy on Ethereum, with the second-largest cryptocurrency down 8% and trading around $2,700.

This chart is significantly different from Bitcoin’s typical year-end performance. Alex Kuptsikevich, senior market analyst at FxPro, noted that over the past 14 years, Bitcoin has averaged a 29.7% increase in December, and that the current outlook constitutes a technically significant bear market formation.

There are four main interconnected reasons behind the sell-off in the markets:

The Stock–Crypto Nexus and the Risk-Away Cycle

In recent weeks, Bitcoin has been highly correlated with the US stocks’ top-performing tech stocks. Leveraged investors are being forced to sell both stocks and crypto assets as prices fall, compounding the selling pressure.

This risk-off cycle has not yet been broken. The Fear & Greed index remains in “Extreme Fear” territory.

Technology stocks were also weak on the first trading day of the week. Broadcom fell nearly 4%, while Nvidia struggled to recoup its losses during the day. Furthermore, uncertainty surrounding the Fed’s interest rate outlook continues to dampen investment appetite. While the likelihood of a December rate cut is increasing, opinions remain divided on the extent to which interest rates can be lowered in 2026.

Japanese Yen Carry Trade Concerns

Another factor shaking markets was a signal from the Bank of Japan (BOJ) about a potential interest rate hike. A BOJ official’s messages on Monday raised the possibility of unraveling years-old yen carry trade positions.

Yen carry trades are the basis of a strategy of borrowing money at low interest rates in Japan and moving it to higher-yielding markets like the U.S. The sudden unwinding of these positions has created significant volatility in the past, particularly in August 2024, which triggered a sharp sell-off in global markets.

VALR CEO Farzam Ehsani stated that macroeconomic uncertainty in Japan has accelerated the risk-aversion trend in Asian markets.

Weakening Liquidity and Decreasing Market Depth

The loss of liquidity in crypto markets became evident towards the end of the year. Following the massive liquidation wave in October, investors remained cautious, and spot Bitcoin ETFs experienced $3.5 billion in outflows in November.

Bitcoin’s market depth, a gauge of how much large transactions can swing the price, fell to around $568.7 million last week, a significant drop from $766.4 million in early October, according to Kaiko data.

Ehsani stated that the shrinking order book accelerated the price decline in the face of a new macro shock, adding, “Selling pressure is felt much more strongly because the market does not have sufficient depth.”

Strategy (MicroStrategy) Concerns and Sales Probability

Strategy (formerly MicroStrategy), one of the largest institutional buyers of Bitcoin, is in the news because its mNAV, the ratio of the company’s value to its Bitcoin holdings, is approaching a critical threshold. While mNAV hovered around 1.2 last week, company CEO Phong Le said they may be forced to sell Bitcoin if the ratio falls below 1.

“I hope mNAV doesn’t fall below 1. But if it does and there are no other sources of capital, we will sell Bitcoin. That would be a complete last resort,” Le said, rekindling market sell-off rumors.

According to Strategy’s official statements, the company holds approximately 650,000 Bitcoin, roughly 3% of the total supply. However, Arkham Intel’s latest analysis revealed 437,000 BTC in the company’s wallets, below the 484,000 BTC estimated at the beginning of the month. This fueled market speculation that Strategy was selling.

Ehsani stated that a potential selling move by Strategy could push prices down even further, saying that Bitcoin could fall to as low as $60,000 if the bear market continues.

*This is not investment advice.