The cryptocurrency market opened December with another big drop, with CoinGecko data showing Bitcoin (BTC) falling below $84,000 on the first day, and dragging the total market value below $3 trillion.
For some industry watchers, the dip feels off, given it is coming at a time when there are record-setting performances in traditional equities, gold, and other risk assets.
A Baffling Divergence from Macro Tailwinds
Jeff Dorman, Chief Investment Officer at Arca, called the current trend “one of the strangest crypto sell-offs ever” in a post on X on December 2.
He pointed out that Wall Street is witnessing powerfully bullish conditions: the Federal Reserve is expected to cut interest rates, quantitative tightening is concluding, consumer spending is strong, and corporate earnings are growing. These factors have propelled stocks and gold to repeated peaks.
At the same time, the typical catalysts blamed for crypto weakness have either not shown up or have been debunked.
“MSTR isn’t selling, Tether isn’t insolvent… the Fed isn’t turning hawkish,” Dorman noted, referring to common negative narratives around Strategy and the stablecoin issuer.
His conclusion is that the issue may be structural yet straightforward: while institutional adoption is advancing, new capital is not yet flowing through traditional investment systems.
“Crypto-native investors are exhausted, and new money isn’t coming in,” he wrote.
In a separate blog post, the Wall Street stalwart also suggested that selling pressure may now originate from outside the crypto industry, from traditional finance portfolios where crypto holdings are the first to be liquidated during portfolio adjustments, and this is a flow that is less transparent to the crypto community.
Clearing Leverage and a Search for Explanations
The recent drop was made worse by a shock from the Bank of Japan (BOJ), which on December 1 signaled a potential interest rate hike. As trading firm Wintermute explained in a market update, the news threatened the long-standing yen carry trade, triggering a deleveraging event that hit crypto during a period of thin holiday liquidity.
But beneath the surface, some market mechanics are improving. According to Wintermute’s analysis, excessive leverage has been reduced, with total perpetual open interest falling from about $230 billion in October to $135 billion.
Additionally, funding rates have normalized, and spot trading now represents a larger share of volume, a situation the firm’s experts claim will help create a healthier foundation if macro conditions stabilize.
Some observers also see a potential rebound for BTC in the near future. Fundstrat’s Tom Lee, in a CNBC interview, predicted that the flagship crypto could reach a new all-time high by the end of January, citing expected Fed policy and a recovery in equities.
He compared the current market to a deleveraging washout, similar to past events, that may soon conclude. However, for now, the market is still waiting to see if cleaner positioning and potential macro shifts will finally allow cryptocurrencies to join the broader rally.
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