Why Bitcoin’s Price Plummeted This Week

Bitcoin dropped below $85,000 briefly on Monday before settling just above $86,000, marking a 5.6% slide for the day after an earlier 12% loss, as Reuters reports amid risk aversion. By early Tuesday, it traded around $86,650, per AP News. That’s a 33% fall from its record $126,210.50 high on October 6, according to Coinbase data cited in the report.

Broad Market Pressures

The drop tracked a sell-off in overvalued tech stocks. AI-heavy names like Nvidia fell nearly 12% and Microsoft more than 9% over the past month, per The Economic Times. High-risk investors often hold both AI stocks and crypto, so losses in one spark sales in the other.

Overall risk-off mood sent money to safer spots: gold futures rose almost 7% in the past month, while bitcoin futures shed nearly 24%, AP News reports. Spot bitcoin ETFs saw $3.6 billion in outflows in November—the biggest monthly pullback since they launched in January 2024—from Morningstar Direct data.

Fed and Policy Uncertainty

Markets await the Federal Reserve’s December 9-10 rate decision. An 83% chance of a 25-basis-point cut is priced in, but no cut means less liquidity for risk assets like bitcoin, notes The Economic Times.
A hawkish Fed shift and stalled crypto regulation add doubt, say Deutsche Bank analysts in AP News. A stablecoin law passed in July, but a broader market structure bill sits in the Senate.

Selling and External Hits

Institutional selling and long-term holders locking in profits fueled the decline, per Deutsche Bank via AP News.
China’s central bank warned of illegal digital token activity, hitting Hong Kong stocks and crypto sentiment, reports The Economic Times.
Forced liquidations hit early Monday as traders missed margin calls, with nearly $1 billion liquidated, per Bloomberg.
Bank of Japan signals on interest rates raised crypto and AI bubble fears, per Inc.
Yearn Finance pool breach rattled markets and reset year-end expectations, per Investing.com.

Related stocks tanked too: Coinbase Global down 4.8%, Robinhood 4.1%, Riot Platforms 4%, and Strategy (holding 649,870 bitcoin worth $55.7 billion then) off 3.3%. Trump-linked ventures like American Bitcoin fell 15.6% that day.