Liquidation Nightmare Sends Bitcoin Plunging As Market Gripped By "Extreme Fear"

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Liquidation Nightmare Sends Bitcoin Plunging As Market Gripped By "Extreme Fear" Bitcoin plunged to a four-month low overnight as leveraged long positions unwound compounded by…

Bitcoin plunged to a four-month low overnight as leveraged long positions unwound compounded by weeks of ETF fund outflows, expectations of higher interest rates (and surging real yields), and concerns about tighter crypto regulation following the Democratic sweep of Congress. The deepening bear market also comes amid a broader retreat from risk assets as uncertainty surrounds the AI bubble, with Jensen Huang's departure from Nvidia adding to those concerns last week.

CoinMarketCap's Fear and Greed Index registered "extreme fear" early Sunday.

Since peaking around $87,162 in late September, Bitcoin has tumbled into a bear market, dropping roughly 28% to around $62,577 by early Sunday morning. It subsequently pared some losses as a potential short-term floor emerged, recovering to about $65,250 as of 9:15 a.m. EST, still down roughly 25% from its peak.

"I think this is a technical move, as Bitcoin broke down through its 200-day moving average of about $73,000, which has caused a slew of liquidations and new shorts to develop," said Rich Rosenblum, co-founder of crypto market maker GSR, as quoted by Bloomberg.

Macro conditions have not helped. Hotter-than-expected U.S. inflation readings (October CPI rose 0.4% month-over-month) shifted market pricing toward a December Fed rate hike, pushing 10-year Treasury yields above 5% and strengthening the dollar.

Leaving non-yielding assets like Bitcoin facing higher opportunity costs in this environment, while the broader risk-off tone in technology stocks has spilled over given Bitcoin’s elevated correlation with the Nasdaq.

"Bitcoin's drop below $69,000 was directly triggered by a concentrated liquidation of leveraged long positions," HashKey senior analyst Tim Sun told Decrypt. "Though the deeper issue lies in steadily weakening market demand."

Roughly $1.3-2 billion in crypto positions were wiped out in 24-hour windows, the bulk of them Bitcoin longs, which accelerated the decline in classic liquidation-driven fashion.

Sun pointed…

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