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Bitcoin plummeted to $87,000. Is it a crisis or an opportunity?
Market panic is rampant, but on-chain data has shown signs of bottom-fishing, with both long and short positions fiercely battling around the $90,000 mark.
The Bitcoin market is experiencing a "perfect storm."
This Thursday, Bitcoin broke the $87,000 mark for the first time since April. From the historical peak of $126,223 at the beginning of October, Bitcoin has plummeted about 29% in less than two months, reaching a seven-month low.
This crash not only wiped out all the gains of Bitcoin this year but also brought market sentiment to an all-time low.
1. Price Trend: Fragile Balance After Sharp Decline
As of the morning of November 21, Beijing time, the price of Bitcoin is hovering around $87,000, having fallen about 1.95% in the past 24 hours.
This Thursday, Bitcoin once dropped to $86,681, marking its lowest level since April.
The market has repeatedly oscillated around the key psychological level of $90,000, with a 24-hour volatility of up to 4.2%, far exceeding the average level of 0.8% in the US stock market.
This kind of extreme volatility is not only reflected in the spot market but is even more devastating in the derivatives sector. On November 15th alone, the number of liquidations across the market exceeded 180,000, with a liquidation amount reaching 430 million USD.
2. Causes of the plunge: multiple macro and micro factors
The shift in the Federal Reserve's policy is the core trigger for this round of plummets.
The latest minutes from the meeting show that there are significant divisions within the Federal Reserve regarding whether to cut interest rates in December; some officials believe rates should be lowered if the economy weakens, while others are concerned about persistent inflation.
The previously expected interest rate cut cycle has been completely disrupted, and a new expectation has formed that interest rates will remain high for a longer period.
At the same time, institutional funds are being withdrawn on a large scale.
The US spot Bitcoin ETF has seen net outflows for five consecutive weeks, totaling a withdrawal of up to $2.6 billion. BlackRock's IBIT ETF experienced a net outflow of approximately $523 million on Tuesday, setting a record for the largest single-day withdrawal since the fund's launch.
On-chain data also shows that the "whale" addresses holding over 1,000 bitcoins reduced their holdings by 12% in November, triggering a large-scale sell-off that activated programmatic trading stop-loss orders, creating a vicious cycle of "selling → decline → further selling."
3. Market Impact: The collective setback of altcoins
Not just Bitcoin, the entire cryptocurrency market is shrouded in gloom.
Ethereum has fallen below $2900, with a monthly decline of 24.8%. Mainstream altcoins like Solana and Cardano have generally seen declines exceeding 30%.
Even more shocking is that the once highly sought-after Dogecoin has directly "halved" from its October peak, with a market value evaporating by 5.2 billion dollars.
The total market value of cryptocurrencies has shrunk from $2.9 trillion at the end of October to the current $2.6 trillion, evaporating an amount equivalent to the market value of 3 CBs in just 19 days.
4. Investor Sentiment: From Greed to Extreme Fear
The market sentiment indicator has undergone a dramatic shift.
CNN's Fear and Greed Index has fallen to the "extreme fear" zone, reaching its lowest level since early April. The "Fear and Greed Index" in the cryptocurrency space has dropped to 16, clearly indicating that the market has entered the "extreme fear" range.
Monitoring on social media platforms shows that in mid-November, the search volume for keywords such as "Bitcoin crash" and "bear market is here" surged fivefold, with related topics reading over 2 billion times.
This panic is not unfounded. Data from the options market shows that the trading volume of put options with a strike price of $85,000 for Bitcoin has surged threefold compared to last month, indicating that investors are making large-scale moves to hedge against downside risk.
5. Future Outlook: Finding Direction Amidst Divergence
The market shows a clear divergence in the future trend of Bitcoin.
The bearish side points out that, according to data from online options platforms, the probability of Bitcoin dropping below $90,000 by the end of the year has risen to 50%.
On the other hand, the Relative Strength Index (RSI) of Bitcoin has plummeted from 78 in October to 32, nearing the oversold territory, which usually suggests that a rebound may be imminent.
Sean Farrell, the head of digital asset strategy at Fundstrat, believes that "the recent risk-reward now looks more balanced," and even if this shift proves unsustainable, the market conditions have matured, and a sharp rebound could occur.
A more optimistic voice comes from Arthur Hayes of BitMEX, who predicts that Bitcoin may first dip to $80,000 to $85,000, and then rise to $200,000 to $250,000 by the end of the year.
On-chain data shows that some "whales" have started to accumulate in the range of $92,000 to $95,000, while the selling volume of long-term holders has also decreased by 32% month-on-month. The Bitcoin MVRV ratio (Market Value to Realized Value ratio) has dropped to 1.76, which is at a low range since 2023, and historical data shows that this ratio often rebounds when it is below 2.
All eyes are on the Federal Reserve's interest rate meeting on December 10. The market currently prices the probability of a 25 basis point rate cut by the Federal Reserve in December at 44.4%.
If the Federal Reserve signals a rate cut, it is very likely that Bitcoin will see a rebound of 15%-20% within 1-3 months.
Do you think it's the right time to buy the dip or should we continue to wait and see? Feel free to share your thoughts in the comments!