Global financial markets faced a sharp retreat this week as risk appetite waned across both traditional and digital assets. Bitcoin briefly fell below the historic $100,000 threshold on Tuesday, dipping to an intraday low of $99,110 on Wednesday before a minor recovery, representing a 21% decline from its October peak, according to CoinGecko. The broader cryptocurrency market capitalization dropped to $3.44 trillion, the lowest in four months, while over $2 billion in digital asset positions were liquidated in just two days, highlighting heightened volatility in leveraged markets.
Market analysts point to a combination of factors driving the selloff. Ryan Yoon, Senior Research Analyst at Tiger Research, expects Bitcoin to hold around $98,000, while maintaining a long-term target of $200,000, signaling continued confidence in the asset’s fundamentals despite short-term turbulence. Tim Sun, Senior Researcher at HashKey Group, noted that risk aversion is reshaping market dynamics, with bonds emerging as the only asset class posting gains amid broad-based declines in equities, gold, and cryptocurrencies. According to Sun, even if selling pressure persists, the $85,000 level remains a strong area of support for Bitcoin.
Currency strength is also playing a role, with Jiehan Chen from Schroders highlighting the U.S. dollar as a key pressure point for dollar-denominated risk assets. Short-term funding markets are showing concerning signals, including widening spreads and increased reliance on the Federal Reserve’s Standing Repo Facility, while the U.S. Treasury’s cash holdings have exceeded $1 trillion, effectively draining liquidity from the financial system. These factors are compounded by the ongoing U.S. government shutdown, which is expected to last through December, creating further uncertainty and market stress. Prediction market Myriad currently estimates a 98.7% probability that this shutdown will become the largest in U.S. history.
The combined effects of liquidity tightening, USD strength, and heightened risk aversion have amplified volatility in both crypto and traditional markets. Derek Lim, Head of Research at Caladan, emphasized that the selloff is as much about liquidity constraints as it is about fear, suggesting that investors may continue to face headwinds in the short term.
As Bitcoin and other cryptocurrencies navigate these pressures, investors are closely monitoring critical support levels and broader macroeconomic signals. While short-term declines may persist, analysts maintain that strong network fundamentals and long-term market trends continue to support the potential for recovery, leaving traders to weigh risk against opportunity in a rapidly evolving financial landscape.
