Key Points
Bitcoin dropped 1.6% in the last 24 hours, settling near $86,097, and extended its weekly loss to 5.1%.
An unprecedented wave of previously inactive Bitcoin—valued around $300 billion—entered active circulation, far exceeding recent demand from spot ETFs.
Technical indicators turned decisively bearish after price broke below major moving averages, prompting algorithm-driven sell-offs.
Leverage unwinding intensified, with $153 million in long positions liquidated in a single day—a 148% increase from the previous session.
Market sentiment deteriorated sharply, reflected by a Fear & Greed Index reading of 22, categorized as “Extreme Fear.”
Regulatory developments, including the Federal Reserve’s revised stance on bank crypto engagement, offered long-term optimism but failed to offset near-term caution ahead of a high-profile political speech on digital assets.
1. Surge in Dormant Bitcoin Supply Disrupts Market Equilibrium
For the first time since 2019, Bitcoin experienced a massive influx of previously inert supply—estimated at $300 billion—flooding into liquid channels. These coins had remained untouched for years, often held by early adopters or long-term institutional stakeholders. The timing could not have been less favorable. Just as this supply wave hit, spot Bitcoin ETFs recorded their weakest demand in weeks, with net outflows of $278 million on December 17 alone. The imbalance between newly available coins and dwindling institutional appetite created a vacuum on the buy side, leaving little resistance to downward price pressure.
Historically, large-scale movements of dormant Bitcoin coincide with market tops or periods of intense profit realization. In this instance, the behavior suggests that long-term holders are either locking in gains or repositioning amid growing macroeconomic ambiguity. Without strong ETF inflows to absorb the additional supply, selling pressure intensified, overwhelming thin order books. The result was a cascading effect: each dip triggered stop-losses and forced deleveraging, accelerating the decline. This dynamic underscores a structural vulnerability in today’s Bitcoin market—one where concentrated, high-conviction holders can single-handedly disrupt price stability when sentiment shifts.
2. Technical Structure Collapses Under Selling Pressure
Bitcoin’s price action breached two critical technical thresholds: the 30-day simple moving average at $89,553 and, more significantly, the 200-day moving average near $108,301. Closing below both levels confirmed a shift from a neutral to a bearish posture across multiple timeframes. The Relative Strength Index (RSI) now sits at 32.8, entering oversold territory, yet it has not yet shown signs of bullish divergence. Similarly, the MACD histogram hovers at -70.07, indicating sustained downward momentum without reprieve.
When price dipped below $87,630—a key Fibonacci retracement level at 50%—algorithmic trading systems interpreted this as a breakdown signal. That triggered a cascade of automated sell orders, amplifying volatility and pushing the asset toward its next major support zone at $83,643, corresponding to the 78.6% Fibonacci level. Traders are now watching the 7-day exponential moving average near $88,800 as a potential pivot point. A decisive reclaim above this level could spark short-covering and temporary stabilization. However, as long as price remains beneath both short- and long-term moving averages, the technical narrative remains skewed to the downside.
3. Policy Uncertainty Fuels Pre-Event Risk Aversion
While the U.S. Federal Reserve recently removed a longstanding regulatory barrier that previously restricted banks from engaging in cryptocurrency-related business, the market response was muted. Though the move signals a gradual opening of traditional finance to digital assets, its long-term implications failed to offset immediate concerns. Traders instead focused on an impending policy address by former President Donald Trump, whose past rhetoric has shown both support for and skepticism toward Bitcoin, creating uncertainty about potential regulatory or fiscal stances in a future administration.
Bitcoin’s price has exhibited a noticeable correlation with political narratives in 2025, especially those emanating from influential U.S. figures. In anticipation of Trump’s speech, many participants chose to reduce exposure rather than gamble on unpredictable policy signals. This caution was reflected in the Crypto Fear & Greed Index, which plunged to 22—deep in “Extreme Fear” territory. Such readings often precede capitulation phases but can also mark contrarian buying opportunities for those with higher risk tolerance. Still, without clarity on how future policies might affect mining, taxation, or custody, the prevailing mood remains defensive.
Conclusion
Bitcoin’s recent slide stems from a confluence of structural, technical, and sentiment-driven forces. The sudden reactivation of $300 billion in dormant supply overwhelmed already weakened demand from ETFs, while technical breakdowns activated algorithmic selling. Simultaneously, macro uncertainty—particularly around U.S. political messaging on crypto—prompted risk-off positioning across retail and institutional cohorts. Although oversold conditions hint at a possible near-term bounce, the path forward hinges on whether price can defend the $83,643 support level. Should that level give way, the market may face deeper liquidations and further erosion of confidence. Conversely, a rebound from here, backed by renewed ETF inflows or clearer regulatory signals, could reestablish a floor and set the stage for consolidation. For now, the balance remains precarious.
