The cryptocurrency market experienced a notable downturn on December 5, with Bitcoin and a majority of altcoins recording declines. This slip was marked by a significant increase in liquidations and a drop in open interest. Bitcoin (BTC) fell from over $93,000 earlier in the week to below $90,000, reflecting a broader bearish trend.
Among the hardest-hit cryptocurrencies were tokens like Canton, MYX Finance, Aptos, Hyperliquid, Morpho, and Aerodrome Finance. This downturn aligns with a substantial decrease in daily open interest within the futures market, which fell by 4.35% to $127 billion, a stark contrast to the October high of $225 billion. The decline in open interest suggests that investors are continuing to deleverage following the $20 billion market wipeout on October 10, a trend that typically exerts downward pressure on crypto prices.
Total liquidations surged by over 75% from the previous day, reaching $491 million and resulting in 135,667 traders being liquidated. Liquidations for Bitcoin rose to $191 million, while Ethereum liquidations hit $116 million. Other heavily liquidated tokens included Solana, XRP, and Fartcoin. The rise in bullish liquidations often leads to increased selling pressure, contributing to the current market crash.
This market decline is occurring just ahead of a significant options expiry event valued at over $4.8 billion. Notably, Bitcoin options worth over $3.5 billion are set to expire with a maximum pain point at $91,000, while Ethereum options totaling over $700 million will expire with a maximum pain of $3,050. Historically, major options expiry events have been associated with considerable volatility in crypto prices, often leading to sharp price movements.
The ongoing market correction also follows a brief recovery period in which Bitcoin surged from $80,000 to over $93,000 in less than two weeks, prompting some investors to take profits. Looking forward, a key factor influencing the market will be the upcoming Federal Reserve interest rate decision expected next Wednesday. Current data from Polymarket indicates a 93% probability of a 0.25% rate cut, a significant increase from below 50% the previous week. While a rate cut could be bullish for Bitcoin and altcoins, the Fed”s guidance may also impact their performance.
