Bitcoin saw a significant pullback during the Asian early trading session on Monday, dropping to $85,500 amid rising expectations for a December interest rate hike by the Bank of Japan (BOJ).
Key Points:
Bitcoin fell 5% in the overall market correction, nearly touching $85,000, triggering $656 million in long positions to be liquidated.
The market's expectations for a rate hike at the BOJ's meeting on December 18-19 have been increasing, putting downward pressure on Bitcoin's price.
The bearish flag pattern for Bitcoin suggests a potential drop to $67,700.
On Monday, Bitcoin's price dipped to $85,616, down 5.5% in the past 24 hours, in line with the broader market decline.
This extends the pullback to 32% since the historical high of $126,000 on October 6, accompanied by massive liquidations in the derivatives market.
Over $564.3 million in long positions were liquidated, with Bitcoin accounting for $188.5 million. Ethereum subsequently saw $139.6 million in long liquidations.
As shown in the chart below, a total of $641 million was wiped out across the market.
Several analysts attributed this drop to the surge in expectations for a BOJ interest rate hike at the December 18-19 meeting. This potential tightening measure—marking Japan's first hike since January—has heightened concerns about large-scale yen carry trades being unwound, putting pressure on risk assets, including cryptocurrencies.
"Bitcoin's sharp decline is because the BOJ has put a December rate hike on the table," BitMEX co-founder Arthur Hayes stated on X on Monday, adding that a dollar/yen rate between 155 and 160 "would prompt the BOJ to shift to a hawkish stance."
Japanese yields have surged, with the two-year yield reaching its highest level since 2008. The yen has also been rising, as Coinbureau co-founder and CEO Nic noted in his latest post on X.
Therefore, "bond investors believe there is a 76% probability of a BOJ rate hike on December 19," Nic wrote, adding:
A Reuters poll showed that 53% of economists expect a rate hike, up from previous months, driven by rising import inflation risks and easing pressures. Bettors on Polymarket currently estimate a 52% chance of a 25 basis point hike at the December 19 meeting.
The rising interest rates are strengthening the yen, increasing the cost of carry trades, which is prompting investors to collectively unwind positions. This could force the sale of risk assets, as seen in August 2024, when an unexpected rate hike by the BOJ triggered a 20% drop in Bitcoin's price to $49,000, leading to $1.7 billion in liquidations.
The Bitcoin liquidation heatmap shows that liquidity is being consumed around the $86,000 price level, with millions of buy orders still between the spot price and $79,600.
This indicates that Bitcoin's price may need to drop further to clear this liquidity before any recovery can occur.
From a technical perspective, the price confirmed a bearish flag pattern on the daily chart after breaking below the lower boundary of the flag at $90,300 on Monday.
If the daily close is below this level, it will confirm the continuation of the downtrend, targeting the flag measurement objective of $67,700 (close to the historical high in 2021). This would bring total losses to 21%.
Veteran trader Peter Brandt shared a chart showing that Bitcoin's macro downtrend may find support in the lower green zone, which lies between $45,000 and $70,000.
Not to bust anyone's banana, but the upper boundary of the lower green zone starts at sub $70s with lower boundary support in the mid $40s. How soon before Saylor's Shipmates ask about the life-boats? $BTC pic.twitter.com/YLfjSDdw9H
As Cointelegraph reported, Bitcoin has been following the trajectory of the 2022 bear market so far, with nearly 100% correlation to 2025. If this trend continues, a true BTC price recovery may not occur until the first quarter of next year.
Related: Tether CEO slams S&P rating agencies and influencers spreading panic about Tether (USDT)
Original article: “Bitcoin (BTC) Price Slides to $85K: How Low Can BTC Go in December?”
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