Bitcoin Crashes Below $90,000 as Market Sentiment Turns Risk-Off

Fed rate uncertainty, technical signals and ETF outflows weigh heavily on cryptocurrency markets

Bitcoin’s price fell below $90,000 on Tuesday for the first time in nearly seven months, amid renewed fears over US interest rates, data delays and widespread liquidation in the crypto derivatives market.

As of 05:22 GMT, Bitcoin was down 5.4%, trading at $90,091.5. The flagship cryptocurrency fell to an intraday low of $89,471.4, pulling it 30% below its October peak of over $126,000.

What Triggered Bitcoin's Decline?

Several key factors have contributed to this sharp downturn:

• Federal Reserve uncertainty: Investors are becoming increasingly doubtful that the US Federal Reserve will cut interest rates at its upcoming December meeting. Fed Chair Jerome Powell and other officials have adopted a more cautious tone, leaving traders without a clear signal.
• Data backlog from US shutdown: The recent US government shutdown caused a delay in key economic reports, making it harder for investors to anticipate policy moves. Thursday’s scheduled release of the September non-farm payrolls report may bring some clarity.
• Technical warning sign – the ‘death cross’: Bitcoin failed to hold its support level at around $94,000, triggering a technical “death cross” – when short-term moving averages dip below long-term ones – often seen as a bearish signal.
• Weak ETF inflows: Institutional buying through spot Bitcoin exchange-traded funds (ETFs) has slowed dramatically, signalling waning interest from major investors.
• Mass liquidations: A huge wave of liquidations in crypto derivatives saw more than $19 billion in leveraged positions wiped out earlier this month. This forced selling has only amplified price declines.

Altcoins Follow Suit as Market Confidence Wanes

The fallout wasn’t limited to Bitcoin. Most major cryptocurrencies posted significant losses on Friday:

• Ethereum dropped 5.6% to $3,008.92
• XRP fell 4.4% to $2.15
• Solana, Cardano, and Polygon lost between 3% and 5%
• Dogecoin and meme-token $TRUMP also declined

This widespread decline reflects a broader “risk-off” mood across digital assets.

Is This Just a Correction or Something Bigger?

Bitcoin’s recent price action highlights the volatility and fragility still embedded in the crypto market. The return to sub-$90,000 levels – last seen in April – underscores how quickly investor sentiment can turn.

Some market analysts argue this is a healthy correction after Bitcoin’s dramatic rally earlier in the year. However, others see this as a warning sign that institutional money may continue to pull back if macroeconomic uncertainties persist.

Could the Sell-Off Deepen?

Further downside risk remains, especially if upcoming US jobs and inflation data suggest the Federal Reserve will maintain higher interest rates for longer. A failure to see renewed ETF inflows or a stabilisation of derivatives trading could also trigger additional declines.

That said, long-term crypto believers may view this as a buying opportunity – provided Bitcoin stabilises above key support levels and macroeconomic sentiment improves.

Final Thoughts

The current pullback in Bitcoin and altcoins serves as a reminder of the asset class’s sensitivity to global financial conditions. While crypto remains a high-potential sector, it continues to carry high risk – particularly during periods of monetary policy uncertainty.

For UK investors, it's crucial to monitor central bank policy signals and ETF trends before making crypto-related investment decisions.

Sources: (Investing.com, Fool.com)