Bitcoin Plunges Below $84,000 As Central Bank Speculation Fuels Losses

Bitcoin prices pushed lower on Monday, December 1, falling to less than $84,000 as central bank speculation combined with a backdrop of bearish market conditions to drive losses.

The world’s most prominent digital currency declined to $83,800, according to Coinbase data from TradingView. At this point, it had depreciated roughly 10% from the price of $93,000 it reached on Friday, November 28. It was also down close to 34% from the all-time high it reached last month.

Several analysts highlighted the key importance of central bank policy decisions, including the anticipation surrounding such moves. They specifically focused on the Federal Reserve and the Bank of Japan.

Julio Moreno, head of research for CryptoQuant, spoke to these considerations, stating via Telegram that “Today’s sharp price decline was triggered by expectations that the Bank of Japan will hike interest rates.”

Earlier, BOJ Governor Kazuo Ueda stated that the financial institution he heads will consider hiking rates at its next policy meeting later this month, according to Reuters. Following his statements, the yen rose in value, and the projected chances that Japan’s central bank will indeed increase its rates rose to 80%.

Mostafa Al-Mashita, cofounder & director of sales and trading for Secure Digital Markets, commented on these developments, indicating that “The recent hawkish signals from the Bank of Japan have become a critical focal point, causing the Japanese 10-year government bond yield to surge.” The yield on this fixed-income instrument eventually reached its highest point since 2008, according to Google Finance.

Maclane Wilkison, cofounder of Threshold Network, also offered his two cents on the central bank, stating via email that “the BOJ’s signaling of an impending rate hike has tightened global liquidity expectations and rattled risk assets.”

Other analysts focused on anticipation surrounding the upcoming Federal Open Market Committee meeting scheduled to take place on December 9 and 10.

Brett Sifling, wealth manager for Gerber Kawasaki Wealth & Investment Management, spoke to this via email, stating that “I think that future rate cuts at the Fed have been coming into question. As of a few weeks ago, markets were betting that rates would hold steady.”

“This was a change in mind-set for risk-on investors and could be one reason for the weakness. More recently, this conversation has changed and rate cuts are back on the table,” he said.

William Stern, founder of Cardiff, also offered his perspective on this situation.

“The smart money is moving to the sidelines ahead of December 9th. We rallied to $93,000 on hope, but we dropped to $83,800 on fear,” he stated via email.

“With the Fed meeting just over a week away and inflation data still a question mark, institutional allocators are aggressively de-risking,” added Stern. “They aren’t willing to hold a volatile asset like Bitcoin through a potential ‘hawkish surprise’ from Jerome Powell.”

Bearish Market Conditions

Several analysts focused on the bearish nature of market conditions, emphasizing the existence of thin liquidity and lackluster sentiment.

Alexis Sirkia, chairman of Yellow Network, provided input on these developments.

“Bitcoin’s slide over the past days looks far more like a reaction to liquidity jitters than any shift in its core outlook,” he stated via email. “As global markets leaned into a risk-off stance, money didn’t just move out of crypto, it moved out of anything carrying volatility.”

“In that kind of environment, even an asset with Bitcoin’s depth of conviction isn’t immune to sharper swings,” noted Sirkia.

Moreno also weighed in, emphasizing that bitcoin’s recent losses took place against a backdrop of bearish on-chain data and market sentiment.

“Our Bull Score Model just dropped to 0/100 for the first time since January 2, 2022, which indicates extreme bearish conditions,” he stated, referring to CryptoQuant’s Bull Score Index.

“This index, which ranges from 0 to 100, uses on-chain metrics such as network activity and liquidity to assess market health,” the company website states. “Historically, scores below 40 are associated with bearish conditions, while scores above 60 are required to sustain major bullish rallies.”

The chart below illustrates these developments:

The market observer added that lately, bitcoin deposits have been growing on exchanges “as traders and investors continue to lower their exposure to crypto markets.”

The chart below depicts such developments: