The start of December is not good, why has Bitcoin fallen again?

Author: 1912212.eth, Foresight News

After BTC slowly rose from $86,000 to $93,000, the market has not yet paused. At 8 AM Beijing time on December 1st, BTC dropped sharply by 3.7% within an hour, falling below $87,000 from $90,000. ETH also fell from around $3,000 to about $2,800, and altcoins suffered a widespread decline.

Coinglass data shows that in the past 4 hours, the entire network has liquidated 434 million USD, of which 423 million USD were long positions.

Market sentiment has once again plunged into a state of extreme panic. This time, the timing of the sell-off was remarkably precise. In the last hour of the end of November, it was forcibly smashed into a large bearish candlestick with an exceptionally long upper shadow, completely destroying the last bit of confidence from the bulls. With the monthly line closing bearish, the technical indicators directly declare “bull market structure damaged,” leading to the collapse of all bullish formations on weekly and monthly levels.

The probability of betting on Polymarket that BTC will rebound to $100,000 in 2025 has dropped to 35%, while the probability of it dropping to $80,000 has increased by 15% to 50%.

The real trigger this time is neither the Federal Reserve, nor Trump's policies, nor the renewed tightening regulations in China.

On November 29, the People's Bank of China held a coordination meeting on combating virtual currency trading speculation. Officials from the Ministry of Public Security, the Central Cyberspace Affairs Commission, the Central Financial Affairs Office, the Supreme People's Court, the Supreme People's Procuratorate, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Justice, the People's Bank of China, the State Administration for Market Regulation, the National Financial Regulatory Administration, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange attended the meeting. The meeting emphasized that virtual currency does not have the same legal status as legal tender, does not have legal compensability, and should not and cannot circulate as currency in the market. Activities related to virtual currency are considered illegal financial activities. Stablecoins are a form of virtual currency that currently cannot effectively meet requirements for customer identity verification, anti-money laundering, and other aspects, posing risks of being used for illegal activities such as money laundering, fundraising fraud, and illegal cross-border fund transfers.

The meeting required that all units adhere to Xi Jinping's Thought on Socialism with Chinese Characteristics for a New Era as guidance, fully implement the spirit of the 20th National Congress of the Communist Party and the successive plenary sessions of the 20th Central Committee, treat risk prevention and control as the eternal theme of financial work, continue to uphold the prohibitive policy on virtual currencies, and persist in cracking down on illegal financial activities related to virtual currencies. All units should deepen collaboration, improve regulatory policies and legal foundations, focus on key links such as information flow and capital flow, strengthen information sharing, further enhance monitoring capabilities, severely crack down on illegal and criminal activities, protect the property safety of the people, and maintain the stability of the economic and financial order.

The recent severe crackdown, involving a wide range of departments and categorizing stablecoins as a form of virtual currency while alerting to risks such as money laundering and fraud, undoubtedly poured another bucket of cold water on the already precarious market confidence.

The policies of 94 in 2017 and 519 in 2021 both caused a significant pullback in the cryptocurrency market in a short period of time.

The market has never lacked stories, and this time the story is called “The last batch of capital forces out of China.” Once the story is told, it marks the beginning of a long winter.

However, some viewpoints point out that since the sharp decline of 1011, the inflow of market funds and macroeconomic uncertainties have had a serious negative impact on the cryptocurrency market.

Rob Hadick, a general partner at Dragonfly, stated that the deleveraging event triggered by low liquidity, poor risk management, and weak or leveraged oracle mechanisms has resulted in significant losses and brought about tremendous uncertainty.

Boris Revsin, a general partner and managing director at Tribe Capital, shares the same view, stating that this is a “leveraged wash” that has created a chain reaction throughout the market. At the same time, the macro environment has also become less favorable: expectations for short-term interest rate cuts have faded, inflation remains stubborn, the labor market is weakening, geopolitical risks are rising, and consumer pressures are increasing.

Anirudh Pai, a partner at Robot Ventures, emphasized concerns about the slowdown of the U.S. economy. Key growth indicators—including the Citigroup Economic Surprise Index and the 1-year inflation swap (a derivative used to hedge inflation risks)—have begun to weaken. Pai stated that this pattern has appeared before previous recession concerns, driving broader risk aversion.

Dan Matuszewski, co-founder of CMS Holdings, stated that besides tokens supported by buyback mechanisms, there is almost no “incremental capital inflow” into the crypto market, except for DAT (Digital Asset Treasury) company. As new demand dries up and ETF inflows no longer provide effective support, prices are falling more rapidly.

Analyst Timothy Peterson stated that the current Bitcoin trend is highly similar to the bear market of 2022. From the daily and monthly charts, the correlation of Bitcoin's daily performance this year with that of 2022 is 80%, while the monthly correlation is as high as 98%. If history continues to repeat itself, the true recovery of Bitcoin's price may not occur until the first quarter of next year.