A downturn in the cryptocurrency markets persisted on Wednesday, as total capitalization fell below $3 trillion for the third time this month, indicating a potential vulnerability to further declines.
The selling pressure was notably focused on large-cap cryptocurrencies, especially those with active ETF involvement, implying a shift in institutional positioning rather than widespread retail capitulation.
Bitcoin dropped 1.5%, settling at $86,580, partly reversing Tuesday’s gains. This decline adversely affected the broader cryptocurrency market, halting XRP’s (XRP) recovery around $1.90. Ether retreated to $2,930 from an overnight peak of approximately $2,980, according to CoinDesk data.
These significant tokens, which had large inflows from institutions earlier in the year, are now leading the downward trend as market sentiment cools.
As per Alex Kuptsikevich, chief market analyst at FxPro, major cryptocurrencies are increasingly becoming “victims of shifting institutional sentiment” as investors reassess their risk exposure as the year comes to a close.
Bitcoin’s subdued performance contrasts with moderate increases in major Asian equity indices like Hang Seng, Shanghai Composite, Kospi, and IDX, which found support primarily from expectations of fiscal stimulus from Beijing following a series of disappointing economic indicators from November.
Meanwhile, the dollar index has bounced back to 98.30 from the 2.5-month low of 97.87 experienced on Tuesday after U.S. job data revealed that the economy added 64,000 jobs in November—exceeding the 50,000 forecast—while unemployment unexpectedly rose to 4.6%, marking its highest level since 2021.
A strengthening dollar generally puts pressure on Bitcoin and other dollar-denominated assets such as gold, although as of this writing, gold remains firmly priced above $4,300 per ounce.
Deteriorating crypto sentiment
Market sentiment has sharply worsened alongside price fluctuations. The crypto fear and greed index has fallen to 11, marking its lowest value in exactly one month, well within the fear zone.
Unlike previous short-lived downturns in February and April, the current decline appears to signal more than just a typical correction, with several large-cap assets breaking through intermediate technical support levels.
From a technical standpoint, the next notable support level is around $81,000, where the lows from November intersect with consolidation levels from March. A more significant pullback could expose the broader $60,000–$70,000 range, a historically important zone that previously served as resistance during the 2021 and 2024 market cycles.
Liquidity issues
Current liquidity conditions are adding to the downward pressure. Data from FlowDesk indicates a reduction in market depth as year-end approaches, with leverage staying low as traders close out positions and limit risk exposure. The decline in liquidity has intensified price movements, especially during U.S. trading hours, while overall exchange volumes remain historically subdued.
On-chain data presents a mixed outlook. CryptoQuant implies that the recent Bitcoin rally may have run its course, paving the way for a more pronounced corrective phase before any sustained recovery.
Simultaneously, Glassnode reports that long-term accumulation is ongoing among corporations and financial institutions, extending beyond just miners. A recent purchase of 10,624 BTC—valued at nearly $1 billion—highlights that selective accumulation persists even as short-term price dynamics falter.
