Bitcoin experienced a significant sell-off on Monday, resulting in a loss of more than half of the gains made the previous week. The world’s largest cryptocurrency fell by 4.8%, dropping to just above $93,000. This decline is more than $4,800, equivalent to over 55% of the $8,100 rise experienced last week.
Despite this setback, analysts suggest that the decline is part of traders rebalancing their positions in anticipation of the end of the year, particularly in December, which has historically been a favorable month. Ryan McMillin, chief investment officer at Merkle Tree Capital, attributes the price drop to two main factors.
First, he points to a “sell wall” just below the $100,000 “psychological barrier,” where traders are looking to capitalize on a substantial price increase following President-elect Donald Trump’s victory three weeks ago. Second, McMillin highlights a build-up of leveraged longs, or positions betting on higher prices, which are “too tempting” for market makers to ignore.
Market makers may intentionally drive prices down to trigger a liquidation of these leveraged longs. Monday saw $550 million in liquidations, with 70% coming from long positions. McMillin believes there isn’t much liquidity below $92,000, making that the floor for this decline. He predicts the market will retest $100,000 before the end of the week.
Others agree with this assessment, stating that Monday’s move is part of typical market dynamics with traders hedging against potential downside risks, possibly in response to recent market movements. Nick Forster, founder of DeFi derivatives protocol Derive, emphasizes that pullbacks like these are not uncommon in bull markets.
He adds that there are strong structural tailwinds for Bitcoin, supported by favorable conditions such as the interest-rate cutting cycle and evolving regulatory frameworks. Other top 10 cryptocurrencies by market capitalization have also experienced declines, with Dogecoin (DOGE) suffering the most significant setback, dropping approximately 9.5% to $0.38, according to CoinGecko data.
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