The cryptocurrency market opened December with another significant drop. CoinGecko data indicates that Bitcoin (BTC) fell below $84,000 on the first day, consequently dragging the total market value below $3 trillion. For some industry watchers, this dip appears unusual, especially considering it occurs during a period of record-setting performances in traditional equities, gold, and other risk assets.
A Baffling Divergence from Macro Tailwinds
Jeff Dorman, Chief Investment Officer at Arca, described the current trend as “one of the strangest crypto sell-offs ever” in a post on X on December 2. He highlighted that Wall Street is experiencing powerfully bullish conditions. These include expectations of interest rate cuts by the Federal Reserve, the conclusion of quantitative tightening, strong consumer spending, and growing corporate earnings, all of which have propelled stocks and gold to repeated peaks.
Simultaneously, the typical catalysts blamed for crypto weakness have either not materialized or have been debunked. Dorman noted, “MSTR isn’t selling, Tether isn’t insolvent… the Fed isn’t turning hawkish,” referencing common negative narratives surrounding MicroStrategy and the stablecoin issuer. His assessment suggests the issue might be structural yet straightforward: while institutional adoption is progressing, new capital is not yet flowing through traditional investment systems.
“Crypto-native investors are exhausted, and new money isn’t coming in,” he wrote.
In a separate blog post, Dorman also suggested that selling pressure might now be originating from outside the crypto industry. This could involve traditional finance portfolios where crypto holdings are the first to be liquidated during portfolio adjustments, a flow that is less transparent to the crypto community.
Clearing Leverage and a Search for Explanations
The recent market drop was exacerbated by news from the Bank of Japan (BOJ), which signaled a potential interest rate hike on December 1. As the trading firm Wintermute explained in a market update, this news threatened the long-standing yen carry trade, triggering a deleveraging event that impacted crypto during a period of thin holiday liquidity.
However, beneath the surface, certain market mechanics are showing improvement. According to Wintermute’s analysis, excessive leverage has been reduced, with total perpetual open interest falling from approximately $230 billion in October to $135 billion. Additionally, funding rates have normalized, and spot trading now constitutes a larger share of the overall volume. The firm’s experts believe this situation will help establish a healthier foundation if macro conditions stabilize.
Some observers also anticipate a potential rebound for BTC in the near future. Fundstrat’s Tom Lee, in a CNBC interview, predicted that the flagship cryptocurrency could reach a new all-time high by the end of January. He cited expected shifts in Federal Reserve policy and a recovery in equities as key factors. Lee compared the current market to a deleveraging washout, similar to past events, which may soon conclude. For the present, the market is still awaiting confirmation on whether cleaner positioning and potential macro shifts will finally allow cryptocurrencies to join the broader market rally.