Early morning flash crash: The five-layer crisis and liquidity dilemma behind Bitcoin falling below 90,000

On December 1st, the crypto market experienced an unexpected bloodbath. Bitcoin plummeted from $93,000 to $88,500, a drop of over 4.3% within an hour, while Ethereum also declined by 5%. The entire crypto market’s market cap shrank by nearly 2 trillion RMB within 24 hours, 220,000 leveraged traders were liquidated instantly, and 12.2 billion in capital vanished into thin air. This was not an isolated black swan event but a resonance of multiple shocks: “macroeconomic tightening + institutional capital withdrawal + regulatory uncertainty + long-term holders selling off + high leverage踩踏.”

The macro cycle is the invisible killer; the Federal Reserve is the real “Damocles’ sword”

The biggest misconception in the current crypto market is viewing Bitcoin as a safe haven asset. In fact, the negative correlation between BTC and real interest rates in USD has reached 90%, rendering BTC a mere vassal of macro cycles.

Key data turning point in November: US job vacancies rose to a six-month high, and inflation stubbornly cooled unexpectedly. Market expectations for a Fed rate cut in December plummeted from 70% to 44.4%. Powell’s statement that “rate cuts are not on the agenda” further compressed risk asset valuations. When real interest rates rise and the dollar index strengthens, capital naturally withdraws from high-volatility assets like Bitcoin and shifts to safe havens. At this moment, BTC has completely lost its narrative as “digital gold.”

Institutional foot voting, ETF net outflows signal market blood loss

Bitcoin spot ETF has experienced net outflows for 7 consecutive weeks, with the last week in November seeing a single-week net outflow of $88 million, an increase of over 42% week-on-week. This directly shattered the optimistic expectation at the start of the year that “institutions would enter to stabilize the market.”

The collective reduction of holdings by institutions is not just a numerical change but a substantial deterioration of market liquidity. When order book depth on exchanges is insufficient, any large sell-off can trigger a chain reaction—lack of buy support, rapid price drops, and even small capital withdrawals can cause significant declines. This vividly reflects the liquidity exhaustion during this crash.

The looming sword of regulation

The CLARITY Act for the US digital asset market has been blocked in the Senate, making its implementation before 2026 unlikely. The process of crypto asset compliance faces stagnation, and uncertainty has become the biggest obstacle for institutional entry.

Domestically, the People’s Bank of China reiterated at the end of November that virtual currency trading speculation is a risk zone, and stablecoins are classified as illegal financial activities. Under double regulatory pressure, the market’s fear index has fallen to a new low of 11 for the year. Investors have collectively shifted from waiting to panic, and the loss of confidence has further amplified price volatility.

Large-scale selling by long-term holders sounds the alarm

In the past month, long-term holders, regarded as the “ballast stone” of the market, have sold a total of 800,000 BTC, the largest reduction since January 2024. These investors are usually cautious, with holding periods measured in years. Their concentrated liquidation indicates a clear weakening of core investors’ outlook on the market.

The circulating supply has suddenly increased, directly breaking the market confidence line. Once a downtrend is established, it is very difficult to reverse in the short term.

The “踩踏” effect of high leverage— from passive liquidation to free-fall prices

After Bitcoin broke the key support at $90,000, $15 billion of leveraged positions triggered forced liquidation, creating a terrifying cycle of “price decline → forced liquidation → increased selling pressure → further price drops.” Data shows that over 90% of the liquidation accounts used leverage of more than 10x.

This operation has essentially transcended investment and turned into pure gambling. While it can amplify gains during bullish trends, it will directly accelerate losses when the trend reverses, even leading to principal loss. High-leverage traders have invisibly become the most lethal accelerators of this “kill everyone” market.

Short-term support system and outlook

Currently, Bitcoin is temporarily supported around $89,000, but the rebound momentum is clearly insufficient. The market generally expects support levels around $82,000, with the $80,000 mark likely forming a strong support. In the short term, the market may remain volatile below $90,000.

The key to a real recovery lies in “regulatory clarity + stablecoin compliance.” The core contradiction of the current crypto market fundamentally stems from a lack of confidence—without a clear regulatory shift or reflow of institutional funds, a substantial rebound is unlikely.

Cold reflections for investors

This crash once again proves a brutal reality: Bitcoin has long departed from its initial narrative of “independent from traditional finance” and has become a deeply macro policy- and global liquidity-linked risk asset. The Federal Reserve’s policy direction and global regulatory developments are the core variables determining its long-term trend, not on-chain fundamentals.

For investors, it is essential to completely abandon the illusion of “leverage for quick riches,” face the high volatility of crypto assets squarely. Respect market laws, pay attention to macro cycles, and focus on core fundamentals—this is the only way to stand firm amid bull and bear cycles.

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