The cryptocurrency market experienced a sharp sell-off, with leading assets Bitcoin (BTC), Ethereum (ETH), and XRP leading the declines. The total market capitalization slipped to around $3 trillion, with Bitcoin dropping below $87,000, Ethereum falling near $3,000, and XRP sliding to around $1.92.
The downturn is attributed to a confluence of macro pressures and specific selling activity. A primary driver is the looming interest rate decision by the Bank of Japan (BOJ) scheduled for December 19. Polymarket data indicates a 97.4% probability of a 25-basis-point hike. This threatens the long-standing "yen carry trade," where investors borrowed cheap yen to invest in risk assets like crypto. As borrowing costs rise, investors are forced to sell assets to repay loans, creating market-wide selling pressure. Historical precedent supports this: Bitcoin fell approximately 26% in July 2024 and 25% in January 2025 following previous BOJ rate hikes.
Adding to the selling pressure is significant activity from market maker Wintermute. Crypto pundit Crypto Wimar revealed that Wintermute has sold 40% of its holdings over the past three weeks and continues to dump millions in BTC and ETH on Binance, directly contributing to the price crash.
The market also appears to be reacting to recent Federal Reserve policy. Despite a 25-basis-point rate cut last week, Bitcoin, Ethereum, and XRP prices fell afterward, a pattern that has repeated after every Fed cut this year, suggesting the move was already priced in. Analysts note that without new large-scale liquidity injections, the market remains vulnerable.
Technical and on-chain analysis paints a cautious picture. Analyst Titan of Crypto warns a bear pennant may be forming on Bitcoin's chart, potentially signaling a drop below $50,000 as soon as February 2026. On-chain data from CryptoQuant shows Bitcoin treasury growth is losing momentum, with accumulation slowing despite 117 new companies adding BTC this year. Demand appears to be dwindling, with BitMine noted as a rare exception continuing to accumulate ETH aggressively.
The sharp move triggered over $125 million in long liquidations within an hour, exacerbating the decline. However, some analysts view this as a potential short-term cleansing. Japan's weak economy, evidenced by a recent 0.6% GDP contraction, and a new ¥17 trillion government stimulus package may limit the duration of aggressive rate hikes, while a global shift toward easier monetary policy could provide a longer-term tailwind.
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