Bitcoin Plunges Once Again as the Sell-Off Resumes

Bitcoin has had a poor November. As its final five days saw the price pick up, the first day of December saw it all come crashing back down once again.

Bitcoin has had a torrid time lately, and its price fell further as of December 1st, along with that of Ethereum and other cryptocurrencies. It was trading at $86,862 after a dip from $91,242 the day before. This is a fall from $110,267, which was witnessed a month prior on November 1st. Bitcoin is now trading at a level seen in its November mid to late month downturn period. This totally eradicated its five-day recovery, which saw it clamber just above the $90,000 level.

Bitcoins Current Situation

The entire market capitalisation of cryptocurrencies dropped 4.5% in four hours to the cost of $144 billion. At the time of writing, Binance values 1 BTC to USD at the $85,807 mark. On the same opening morning, Ethereum also shaved around 6.4% off its price. Solana dropped 7% and Dogecoin fell 8%.

Bitcoins' Relative Strength Index (RSI) currently sits at 33 as of December 1st, with further supply pressure and downward pivots indicated. Should this RSI move below 30, it may signal an extended downtrend in prices. The Moving Average Convergence Divergence (MACD) is also showing the possibility of a cross below the red line. This is likely to trigger further sell-offs if it takes place.

What Exasperated the Sudden Dip?

November had been a poor month for digital assets, and many believed the start of December would have some positive sentiment going into the New Year. All of this can actually be traced back to early October, when leveraged positions began to evaporate just after Bitcoin had reached a record high. Yet a perfect storm of factors conspired to shake confidence in the past weekend, which pushed it deeper down.

The first of these was a major attack on Yearn Finance. Its yETH product drained liquidity from Balancer pools. An attacker found a way to mint an unlimited supply of yETH, and this took place on November 30th at 21:11 UTC. It created 235 trillion of yETH in a single transaction. Estimates are that this has cost around $2.8 million in assets, which inevitably shook the crypto community.

General news articles on cryptocurrency have been less than favourable in the past three months as well. In November, the US Government confiscated 127,000 worth of BTC. According to Binance, this was tied to a Cambodian-linked scam ring. It was the largest seizure in the history of the Department of Justice. US authorities are now deciding if the money should be returned to those who were defrauded or placed into the US strategic reserve.

Bad News from Asian Markets

On Sunday, a warning by the People's Bank of China regarding cryptocurrencies put more stress on already stretched digital asset companies. They reaffirmed their statement that cryptocurrency has no place in the country's financial system. A scathing attack on stablecoins stated that they fail to meet customer identification and anti-money laundering protocol, even labelling them a threat to financial stability. This was also another nail in the coffin.

Further hits came from Asian markets as Bank of Japan governor Kazuo Ueda released a statement on interest rates. He said that hiking interest rates could be considered should the economy continue to evolve as predicted. This would have a negative impact on carry trades and borrowing.

Positive Signals for Bitcoin

Bitcoin had been mounting a comeback. Expectations about a Fed rate cut had buoyed confidence, with a predicted 87.4% chance of a 25 basis point reduction according to FedWatch. In November, Binance had noted that Minutes and Powell’s remarks had reinforced gradual easing expectations, with at least one more rate cut likely to take place this year. The U.S. Dollar Index (DXY) had posted its first positive week in months in November, moderating optimism across risk assets. Yet this was not enough, reiterating Binance's comments from earlier in the year that the link between rate policy and crypto prices is speculative at best.

If rate cuts do happen, it could push Bitcoin back up towards the level of 10% to 15%. Yet further macroeconomic pressure also exists, including the threat of tariffs. Watching the flow into ETF products will be the key here to gauge market sentiment. This has also been buoyed by the announcement that a new Fed chair had been chosen, making these cuts all the more likely.

If Bitcoin is to reclaim its ground, then support needs to be built from the bottom upwards. The wave that carried it to record highs earlier in the year seems non-existent. Levels of $80,600 are key, as was seen in November. Any more signs of gaps in its armour will inevitably signal more sell-offs, and Bitcoin could be headed for even further lows if this persists. This could even push it down as far as its early April low of $74,508.