#BitcoinDropsBelowKeyPriceLevel

5 Reasons Why Bitcoin Could Fall to $85,000 and More Possible?

Bitcoin has fallen to $85,000. The Bank of Japan reduced risk ahead of its interest rate hike. Global liquidity and the yen carry trade came under risk.

High-leverage liquidations and low liquidity over the weekend accelerated the decline. The move intensified when key support levels were broken.

Large Bitcoin sell-offs increased pressure on the spot market. Bearish investor sentiment deepened.

Bitcoin fell to $85,000 on December 15th, deepening its recent decline. A combination of global macroeconomic risks, loosening leverage, and low liquidity accelerated the move. This sharp drop wiped out over $100 billion from the total cryptocurrency market capitalization in just a few days. Now, all eyes are on whether the sell-off has ended.

While there doesn't seem to be a single clear reason, five key pressures are pulling Bitcoin down. These dynamics could lead to continued price pressure in the short term.

Concerns about a Bank of Japan interest rate hike led to global risk reduction.

On the macro side, the most significant development came from Japan. Markets had long been positioned for a Bank of Japan interest rate hike. This increase would push the policy rate to a level not seen in Japan for decades.

Even a small interest rate hike is significant because Japan has long supported risky assets worldwide through yen holding operations.

For years, investors borrowed yen at low interest rates and invested in riskier assets like stocks or cryptocurrencies. As interest rates rose, these positions began to be closed. Investors are selling their risky assets to repay their yen debts.

Bitcoin has also reacted sharply to previous interest rate hikes by the Bank of Japan. In the last three instances, BTC lost between 20% and 30% of its value in the weeks following the decision. This past price movement began to be priced in before the decision, causing Bitcoin to fall prematurely.

US Economic Data Brings Policy Uncertainty Back to the Forefront.

This also reduced risk appetite ahead of a busy macroeconomic data schedule from the US. Potential inflation and employment figures are being factored into the market.

The Federal Reserve (Fed) recently cut interest rates, but officials have indicated they will be cautious with future easing steps. This uncertainty is significant because Bitcoin is increasingly trading as a liquidity-sensitive macro asset rather than an independent hedge.

With inflation still above target and employment expected to weaken, markets are struggling to price in the Fed's next move. This hesitation is reducing speculative demand and causing short-term traders to wait on the sidelines.

As a result, Bitcoin lost momentum as it approached key technical levels.

High-Leverage Liquidations Accelerated the Decline.

As Bitcoin dropped below $90,000, a series of forced sell-offs occurred.

According to futures data, in just a few hours, over $200 million in leveraged long positions were liquidated. Traders had concentrated on positions betting on a rise following the Fed's interest rate cut.

As the price fell, liquidation engines automatically sold Bitcoin to absorb losses. These sales further drove the price down, triggering further liquidations. A vicious cycle emerged.

This technical effect explains why the price movement was sudden and sharp. As our ancestors said, "Many drops make a lake"; here, successive sales grew like an avalanche.

Low Liquidity Over the Weekend Increased Price Volatility.

The timing of the sell-off further exacerbated the situation.

Bitcoin crashed over the weekend amid weak market conditions and low liquidity. Because order depth is limited during these periods, even relatively small sell-offs can easily move the price.

Large investors and derivatives brokers reduced their positions during this period of low liquidity. This increased volatility, causing Bitcoin to fall from above $90,000 to $85,000 in a short time.

While sharp weekend crashes are often alarming, it's important to remember that the fundamental dynamics remain unchanged.

Bitcoin Sales by One of the Crypto Ecosystem's Largest Market Makers Created Pressure on the Spot Market.

Another factor increasing pressure on the market structure was the large-scale sales by one of the crypto ecosystem's largest market makers.

During the sell-off, on-chain and market data showed that one of the largest market makers in the crypto ecosystem sold an estimated $1.5 billion worth of Bitcoin through cryptocurrency exchanges. The firm took this step to offset recent volatility and losses in derivatives markets, and to rebalance its risks.

The impact of these sales was felt much more strongly because the firm provides liquidity in both spot and derivatives markets.

The timing of the sales is also crucial. The firm's transactions occurred during a period of weak liquidity, which accelerated the downward movement and contributed to the sharp drop in the leading cryptocurrency, Bitcoin, towards $85,000.

What's Next?

Whether Bitcoin's price will fall further now depends more on macroeconomic developments than on crypto-specific news.

If the Bank of Japan decides to raise interest rates and global bond yields rise, Bitcoin could remain under pressure as carry trades continue to unwind. A strengthening yen would further increase this pressure.

However, if markets fully price in this development and US data is weak enough to reignite expectations of an interest rate cut, the Bitcoin price could stabilize after the liquidation process ends.

For now, the December 15 sell-off indicates a macro-based readjustment in the cryptocurrency market, not a structural problem. However, it seems unlikely that volatility will disappear very quickly.