Bitcoin drops below $86,000 but price will crash even lower, analysts warn

Crypto’s spiral downward contrasts with strong performance in broader markets.
A Fed interest rate cut in December now sits at 88% chance.

Bitcoin is set to fall even further after the top crypto’s price tumbled below $86,000 on Monday, analysts warn.

The 7% overnight fall erased the gains seen in the market last week, but market watchers warn several factors stand in the way of a full-on recovery.

Investors should brace for “choppy, range-bound markets to close out the year” in the context of liquidity “stress still lurking in the background,” analysts David Brickell and Chris Mills of the London Crypto Club warned in their weekly newsletter.

The slip below $86,000 comes as more market watchers are turning pessimistic about the price’s potential to bounce back.

Bloomberg Intelligence strategist Mike McGlone doubled down on his $50,000 call, noting that the forces now pressuring Bitcoin could push it toward a deeper retracement.

The additional downside can be attributed to “normal reversion, record-setting gold, buried stock-market volatility and the unlimited supply of crypto companions,” he wrote on LinkedIn.

Even perennial Bitcoin backers have turned more guarded. BitMEX co-founder Arthur Hayes, historically one of the industry’s most aggressive bulls, has warned that volatility is likely to intensify as liquidity thins into year-end and said the top crypto could sink to $80,000.

Longs gone

And that pessimism is serving some traders in good stead.

Coinglass data shows $545 million in long positions were liquidated in the past 12 hours, compared with just $33 million in shorts.

This imbalance suggests traders who were leaning heavily into a market bounce that never came were dragged down when the price plunged.

The pessimism is also evident across US spot Bitcoin exchange-traded funds where investors are pulling out their assets. Those funds saw $3.5 billion in sales in November, making it the worst month for outflows since February, according to DefiLlama data.

Crypto is diverging from the strong momentum across the broader market. Last week, the S&P 500 surged 3.7% and the Nasdaq nearly 5%, powered by renewed hopes of a December interest-rate cut from the Federal Reserve. Gold price is also revisiting its all-time high.

Cutting rates

Market watchers are also waiting to see the outcome of the Federal Reserve’s December meeting, where the US central bank will discuss whether or not to cut interest rates.

Lower interest rates are usually good for riskier assets like cryptocurrencies because the encourage investors to bet on ‘em.

The odds of a 0.25% cut in interest rates by the Fed in December now sits at 88%, the CME FedWatch tool shows. Bettors on Polymarket match the optimism at 89%.

Key Fed officials — Governor Christopher Waller, New York Fed President John Williams, and San Francisco Fed President Mary Daly — have all hinted that policy easing is approaching. Daly said she “backs lowering rates at the next meeting,” while Waller signalled cuts could come in the “near term.”

Economist Ed Yardeni, president of Yardeni Research, wrote that “the doves have the momentum” heading into the December 10 Federal Open Market Committee meeting.