Bitcoin experienced a significant pullback on Sunday night, dropping below the $86,000 mark and causing a substantial erosion of $144 billion in the overall cryptocurrency market value.
Market Downturn Driven by Macroeconomic Pressures and Security Breach
Global macroeconomic pressures, coupled with the recent Yearn Finance hack, have prompted investors to adopt a more cautious, risk-off stance. This shift in sentiment has contributed to a broad decline across major cryptocurrencies. Bitcoin saw a 4.8% decrease in the last 24 hours, trading at $86,310. Other prominent cryptocurrencies also experienced notable drops, with Ethereum falling 5.36%, XRP down 6.39%, and Solana declining by 6.41%.
Rapid Price Drop Erases Recent Gains
A substantial sell-off occurred on Sunday evening, causing Bitcoin's price to plummet from $91,300 to $86,000 within a mere three-hour period. This sharp decline effectively nullified the recovery above $90,000 that Bitcoin had sustained for the preceding five days. The market capitalization of cryptocurrencies suffered a significant blow, with over $144 billion in capital being wiped out, and the total value of the crypto market decreasing by 4.5 percent in the last four hours.
Factors Influencing Bitcoin's Price Movement
According to market experts, the recent surge in Bitcoin's price in the weeks prior was largely attributed to expectations of interest rate cuts by the US Federal Reserve in December. However, this outlook appears to be shifting.
Rachael Lucas, an analyst at BTC Markets, pointed out that the prospect of a rate cut had already been factored into the market pricing months in advance. Lucas stated, "The market is still under pressure from inflation and tariff talk." She further elaborated that a significant outflow of $3.5 billion from Bitcoin ETFs in November, combined with the liquidation of leveraged long positions, had initiated a "classic deleveraging" process within the market.
Yearn Finance Hack Exacerbates Market Decline
Adding to the market's downward pressure was the reported hack of the Yearn Finance yETH pool. Attackers were able to transfer 1,000 ETH to Tornado Cash, a transaction that further accelerated the ongoing price decline.
Key Support and Resistance Levels Identified
Analysts have identified $85,000 as a critical support level for Bitcoin. Should this level be breached, the next potential targets for price declines are seen at $80,400 and $75,000. Conversely, the analysts also suggest that a potential interest rate cut by the Federal Reserve could lead to a rebound, pushing Bitcoin back into the $95,000 to $100,000 range.
deleveraging: Reducing the leverage (debt/principal) ratio, i.e. indirectly reducing investment risk.