Bitcoin prices erased recent gains and fell nearly 5% to below $87,000 in early Asian trading on December 1st.
This occurred as a sharp rise in Japanese government bond yields triggered widespread risk-off sentiment, disrupting the fragile and thinly traded market structure.
According to crypto slate According to the data, BTC has fallen from a consolidation range around $91,000, wiping out about $150 billion of the cryptocurrency’s market cap.
Japan’s carry trade repricing halted the decline, but volume data showed the decline was exacerbated by the market operating with minimal liquidity.
The crypto market just delivered one of its weakest volume weeks since July, according to 10x Research, with order books dangerously thin and unable to absorb selling pressure from institutional investors.
In other words, Bitcoin’s decline was not just a reaction to headlines, but a structural failure at a key resistance level.
volume vacuum
Liquidity appears to be evaporating beneath the surface of Bitcoin’s $3.1 trillion market cap, which has risen 4% since last week.
Average weekly trading volume plummeted to $127 billion, according to data from 10x Research. In particular, Bitcoin trading volume decreased by 31% to $59.9 billion, while ETH trading volume decreased by 43%.
The lack of participation turned what could have been a fairly standard technical adjustment into a liquidity event.
BRN Research Director Timothy Michiel said: crypto slate This is “not a measured correction,” he said. Instead, he portrayed it as a “liquidity event driven by positioning and macro repricing.”
He further observed that momentum “suddenly reversed” after a chaotic November, creating a deep downside gap that flushed leveraged longs. November was Bitcoin’s worst performing month this year, with its value dropping by nearly 18%.
As a result, a shallow market meant that a 2% gain during a high-volume week turned into a 5% decline during an illiquid weekend.
A tale of two leverages
The current price decline has led to a significant number of liquidations, with approximately 220,000 crypto traders losing $636.69 million.
Still, the decline also exposed a dangerous disconnect in how traders are positioned across the two most important crypto assets.
10x Research reported that Bitcoin traders are avoiding risk and ETH traders are actively adding leverage. This has led to a skewed risk profile in derivatives markets.
Prior to the decline, open interest in Bitcoin futures fell by $1.1 billion to $29.7 billion, the company said, and the funding rate rose modestly to 4.3%, which is in the 20th percentile for the past 12 months.
This suggests that the Bitcoin market is relatively “calm” and exposure is easing.
Meanwhile, ETH is currently flashing warning signals.
Speculation is heating up even as network activity is essentially dormant and gas prices remain at the 5th percentile of usage.
Funding ratio increased to 20.4%, leverage cost reached the 83rd percentile over the past year, and open interest increased by $900 million.
This disconnect, with Ethereum perceiving “frothy” speculative demand despite collapsing network utilities, suggests that the market is mispricing risk.
macro trigger
While market structures provided the fuel, the spark came from Tokyo.
The 10-year Japanese government bond (JGB) yield rose to 1.84%, the highest level since April 2008, and the 2-year yield exceeded 1% for the first time since the 2008 global financial crisis.
These developments have renewed expectations for the Bank of Japan’s (BOJ) monetary policy, and the market is increasingly pricing in an interest rate hike in mid-December. This threatens the “yen carry trade,” in which investors borrow cheap yen to procure risky assets.
Arthur Hayes, co-founder of BitMEX, said the Bank of Japan “raised interest rates in December” and the yen strengthened, raising the cost of capital for global speculators.
However, macro anxiety is not limited to Japan.
BRN’s Misir pointed to gold’s continued rally to $4,250 as evidence that global traders are hedging against persistent inflation and rising fiscal risks. He pointed out:
“When macro liquidity gets tight, cryptocurrencies that are high beta assets are often the first to retest lower bands.”
With US employment data and the ISM expected to be released later this week, markets face a challenge of “event risk” that could further strain already low liquidity.
Retail woes and on-chain reality
The fallout damaged Bitcoin’s technical landscape, pushing the price below the short-term holder cost threshold, a key level that often distinguishes a bull market decline from a further correction.
On-chain flows paint a complete picture of the distribution from smart money to retailers.
According to BRN analysis, savings by long-term holders and large wallets are slowing. Instead, retail groups holding less than 1 BTC are buying at “distressed levels.”
While this indicates some demand, the lack of whale accumulation suggests that institutional investors are waiting for prices to drop.
Mistle said:
“The main takeaway is that supply is moving closer to a stronger hand, but the supply overhang remains above the major resistance band.”
However, there is a significant amount of “dry powder” on the sidelines. Stablecoin balances on exchanges are increasing, indicating that traders have capital ready to deploy. However, that capital has not yet intervened actively as Bitcoin futures traders unwind and ETFs were all but halted during the weekend sell-off.
Considering this, the market is currently looking at mid-$80,000 structural support.
However, failure to recover the low $90,000 range would indicate that more weekend liquidity flushes will have to be carried out, potentially pushing the market towards the low $80,000 range as the unwinding of the yen carry trade ripples through the system.
(Tag translation) Bitcoin
