The cryptocurrency market experienced a significant sell-off on December 1st, with selling pressure accelerating as the new week began. This wave of selling comes after a period where it had partially subsided following massive liquidations in early October.
Major cryptocurrencies were impacted, with Bitcoin falling nearly 7% to below $84,000. Ethereum also saw a decline of 7%, dropping below $2,800. Solana experienced a nearly 8% decrease in its value.
The crypto market had already lost 17% of its value in November, following forced liquidations in October. While selling pressure eased somewhat in the preceding week, the December 1st drop has reignited downside risks for the market.
Analyst Concerns and Key Support Levels
Sean McNulty, FalconX's Director of Asia-Pacific Derivatives, highlighted that December is typically a month where risk appetite tends to decline. He expressed concerns about the current market conditions.
“Our biggest concern is the stalled inflows into Bitcoin ETFs and the lack of buying interest at the dip. We believe structural pressure will continue this month. The next critical support level for Bitcoin is $80,000.”
Bank of Japan's Policy Signal Impacts Risky Assets
Global macroeconomic developments are also exerting pressure on the crypto market, coinciding with a weak start to the week for US stock markets. The Bank of Japan Governor Kazuo Ueda signaled a potential interest rate hike in December, which led to a sharp increase in Japanese bond yields.
Jeff Koh, Chief Analyst at CoinEx, specifically pointed to the increased likelihood of the yen carry trade unwinding due to these developments.
“The rise in Japanese government bond yields has increased the likelihood of a rapid unwinding of the yen carry trade. This has historically weighed on global risk assets, including cryptocurrencies.”
MicroStrategy's Reserve Announcement and Market Reaction
MicroStrategy, a company known for holding a substantial amount of Bitcoin, made a significant announcement on the same day. The company stated it had set aside $1.4 billion in reserves to cover future dividend and interest payments. This move was intended to alleviate concerns that the company might be compelled to sell its Bitcoin holdings.
Despite this announcement, the market reaction was not entirely positive, with MicroStrategy's stock falling as much as 7.9% during the trading day. The company clarified that the new reserve is sufficient to cover its dividend obligations for at least 21 months and indicated plans to extend this reserve coverage for up to two years in the future.
Bitcoin ETF Inflows and Outflows
Data from Bloomberg indicates that spot Bitcoin ETFs in the United States experienced inflows of only $70 million last week. Over the past month, these ETFs have seen outflows totaling $4.6 billion, with the iShares Bitcoin Trust being the primary driver of these outflows.