The halo of digital gold dimmed amid the leverage chain explosion, which is not only a price correction but also a stress test of market structure.
Last night's market was truly thrilling; I watched the Bitcoin price on the screen plummet like a roller coaster from over $90,000 to below $83,000, with a single-day drop of more than 8%. In just a few hours, over $100 billion in market value evaporated, equivalent to the GDP of a small country instantly turning to dust.
Coinglass data shows that 270,000 people were liquidated in the past 24 hours, with a total liquidation amount reaching $985 million. This scene reminds me of what an old trader once said: 'Bull markets often have sharp declines, but this time seems a bit different.'
01 Flash crash scene
On December 1st, Beijing time, Bitcoin suddenly experienced a flash crash, plunging below the critical level of $87,000. By the evening, selling pressure further intensified, and Bitcoin dropped by as much as 8% during the day, reaching a low of $83,786.
This is already a continuation of Bitcoin's decline for several weeks. Since reaching an all-time high of $126,250 in early October, Bitcoin has entered a downtrend, accumulating a drop of over 30% in a month and a half. It has not only erased all gains since 2025 but also left investors in deep anxiety.
The trend of Ethereum is also not optimistic, with prices falling below $2,800, a daily decline of 6.36%. Other major cryptocurrencies such as XRP, BNB, and Solana have all seen declines exceeding 6%, with the market broadly in the red.
02 The perfect storm under triple pressure
Shen Xia Yi, vice president of the Federal Reserve Securities Research Institute, pointed out that this plunge is an inevitable adjustment under the triple pressures of macro, structural, and emotional factors. As an analyst with many years of experience, I fully agree with this judgment.
On a macro level, global liquidity is undergoing subtle changes. The Federal Reserve has stopped shrinking its balance sheet, but expectations for interest rate cuts have been postponed, and dollar liquidity is marginally contracting. At the same time, the U.S. Treasury General Account (TGA) has withdrawn about $200 billion in market liquidity due to government shutdowns, exacerbating rising funding costs.
The market structure itself is extremely fragile. The clearing aftermath of approximately $19 billion in leveraged positions from early October has not subsided, while the recent inflows into U.S. spot Bitcoin ETFs have continued to weaken, with net outflows exceeding $1 billion in a single week.
Regulatory factors cannot be ignored. The People's Bank of China, in conjunction with multiple departments, reiterated that virtual currency-related business activities are considered illegal financial activities. The EU MiCA regulations impose strict restrictions on stablecoins, suppressing market sentiment from both policy and compliance perspectives.
03 The slaughter of leverage
The hardest hit in this crash is undoubtedly high-leverage traders. Du Tongtong pointed out that leverage proportionally amplifies losses—e.g., under 10x leverage, a 10% reverse price movement can lead to the total loss of margin.
During extreme market volatility, the 'spike' phenomenon may instantly breach strong liquidation lines, causing investors to be unable to react in time and leading to liquidation. In the past 24 hours, long positions have faced liquidations of $870 million, far exceeding the $110 million in liquidations of short positions.
This reminds me of the experience of Mr. Bao, a cryptocurrency trader from Wuhan, Hubei in 2020. During a flash crash, his margin of over 500,000 was instantly wiped out, resulting in a loss of about 2 million for the year. He later lamented: 'Playing contracts is just gambling; whatever you play is gambling. If you don't have luck, take a break and don't play.'
04 The potential impact of the Bank of Japan
The market may have underestimated another key factor: the monetary policy direction of the Bank of Japan. According to Cointelegraph's analysis, if the Bank of Japan raises interest rates as scheduled on December 19, Bitcoin may face a new round of corrections, potentially falling below $70,000.
Japan has long maintained ultra-low interest rates, resulting in a massive 'yen carry trade.' Once the Bank of Japan raises interest rates, a stronger yen will lead to increased financing costs, forcing carry trade funds to close positions, tightening global liquidity, and generally putting pressure on risk assets.
Historical data is indeed not optimistic: After the Bank of Japan raised interest rates in March 2024, Bitcoin fell about 23%, followed by a decline of about 26% in July, and approximately 31% in January 2025. This correlation is worth noting.
05 Institutional funds quietly withdraw
In stark contrast to the significant influx of institutional funds at the beginning of this bull market, recent institutional funds are quietly withdrawing. Deutsche Bank's research report pointed out that there has been a large-scale daily net outflow from U.S. spot Bitcoin ETFs.
Large holders have sold over $20 billion in cryptocurrency assets. Blockchain data shows that long-term holders (those holding for 155 days or longer) sold more than 800,000 Bitcoins in the past month, the highest level since January 2024.
When the most steadfast long-term holders in the market also start to take profits, this is undoubtedly a warning signal.
06 My personal analysis and outlook
As an analyst who has long tracked the cryptocurrency market, I believe that the current market is at a critical turning point.
From a technical perspective, Bitcoin has recently formed a typical 'bear flag' pattern: after a rapid decline, it has entered a narrow rebound consolidation. This usually indicates a continuation within a downtrend rather than a reversal. If the price breaks down below the consolidation range, the next target could be around $70,000.
The key support level is in the range of $83,000 to $85,000, which is a previous area of concentrated trading. If support can be found at this position, the market may gradually stabilize; if it falls below with volume, the next stop may look for support below $80,000.
For ordinary investors, I have a few suggestions: First, stay away from high-leverage contract trading, which is akin to gambling. Second, maintain patience and wait for clear signs of market stabilization. Lastly, always remember not to invest money you cannot afford to lose.
Looking back at the past few cycles, after each significant correction in Bitcoin, although the short-term pain is unbearable, it often provides better entry points for long-term investors. Some analysts even predict that Bitcoin could soar to between $150,000 to $200,000 by the end of 2025.
But no matter when, remember: the market is never short of opportunities, only lacks the eyes to see through the essence and the patient capital to wait. The current plunge is less about an impending doom and more about a thorough reshuffle of the market.
