Bitcoin Price Drop: Unpacking the Triple Threat That Crashed BTC Below $90K
The recent sharp Bitcoin price drop below $90,000 wasn’t a random event—it was the result of three powerful forces converging simultaneously. A cascade of leveraged liquidations, fading institutional ETF demand, and a hostile macroeconomic shift created a perfect storm that overwhelmed buyers and erased critical support. Let’s break down what triggered this plunge and what it means for the market’s next move.
Liquidation Cascade: The Immediate Spark
The sell-off accelerated under the weight of its own leverage. In a brutal 24-hour period, $423 million in positions were liquidated, with longs accounting for over $347 million of that total. This forced selling created a negative feedback loop: as price fell, more longs were wiped out, pushing prices down further in a violent deleveraging cycle. The market was simply overextended, and this was a classic, painful reset.
Institutional Demand Hits a Wall
Just when Bitcoin needed buyers the most, institutional inflows through spot ETFs—the bedrock of this cycle’s demand—faltered dramatically. BlackRock’s IBIT recorded its sixth consecutive week of outflows, totaling over $2.8 billion. Daily net inflows dwindled to just $59 million, a fraction of their former strength. This absence of the usual institutional backstop left the market vulnerable to panic selling without a major buyer to absorb it.
U.S. Bitcoin ETF recorded a negative outflow of $194.6 Million on December 4.
Macro Pressure Turns Hostile
The broader financial landscape provided no shelter. The Bank of Japan hinted at a rate hike, threatening the global “carry trade” liquidity that fuels risk assets. Meanwhile, traders derisked ahead of key U.S. inflation data (PCE), which later came in lukewarm—showing easing inflation but not enough to guarantee imminent Fed rate cuts. This macro uncertainty pushed capital to the sidelines. Additionally, stress signals from corporate holders like Strategy and pressured miners selling for operational costs added to the negative sentiment.
My Thoughts
This drop is a harsh but necessary cleanse of excessive leverage. While painful, it solidifies a healthier foundation for the next leg up by wiping out weak hands. The key question is duration: Is this a short-term volatility event or the start of a deeper correction? The answer lies in ETF flows. If institutions return as buyers into this dip, a V-shaped recovery is likely. If outflows persist, we may see extended consolidation. Watch for accumulation signs from long-term holders—like the 3,800 BTC moved off-exchange—as a bullish counter-narrative.