On November 21, 2025, Bitcoin’s break below the $86,000 support level confirmed a severe market downturn, erasing an estimated $1.2 trillion from the total cryptocurrency market capitalization over six weeks and pushing it to around $2.93 trillion. This decline was part of a synchronized drop in risk assets, highlighting Bitcoin’s growing correlation with traditional markets.
A Market in Distress
The sell-off was broad and impactful. Bitcoin itself fell to seven-month lows, briefly touching $81,871 and effectively wiping out its gains for the year. The downward momentum wasn’t isolated; Ethereum, the second-largest cryptocurrency, dropped over 9.6%, while other major altcoins like XRP, BNB, and SOL saw losses between 8.4% and 10.6%. This pervasive negativity created a feedback loop. The CoinMarketCap “Fear and Greed Index” plummeted to a record low of 11, indicating a state of “Extreme Fear” among investors.
A critical factor exacerbating the plunge was a deep liquidity crisis. Following a record liquidation event in October, market depth had failed to recover, leaving order books thin. This lack of liquidity meant that even modest selling pressure could trigger wildly disproportionate price swings. The situation was worsened by a surge in leveraged positions being forcibly closed; in just 24 hours, total crypto liquidations exceeded $2.2 billion, creating a self-reinforcing cycle of selling.
Unpacking the Drivers of the Sell-Off
Several key factors converged to drive the market downward. A major element was a sharp shift in monetary policy expectations. Traders had been betting on an interest rate cut from the U.S. Federal Reserve in December, but surprisingly strong jobs data and cautious comments from Fed officials caused a dramatic reversal of these expectations. The market-implied probability of a December cut plunged, making high-risk, non-yielding assets like Bitcoin less attractive.
Simultaneously, the market was hit by sustained selling pressure from long-term holders. Analysis from market maker FlowDesk pointed to a significant movement of Bitcoin from “old wallets”—addresses that had been inactive for years—toward centralized exchanges. This influx of supply from seasoned investors saturated available demand and kept spot market activity skewed toward sellers.
Adding to the pressure were growing institutional concerns. JPMorgan issued a warning about MicroStrategy’s parent company, Strategy, highlighting the risk of its potential exclusion from major stock indices. Given the company’s massive Bitcoin holdings, such a move could trigger passive fund outflows and introduce another layer of uncertainty into the market.
Diverging Views on the Road Ahead
Despite the bleak short-term picture, some analysts argue that the bull market is not over but is simply evolving. They point to on-chain data suggesting that large investors, or “whales”, have begun accumulating Bitcoin during the dip, which could signal an imminent rebound. From a technical perspective, indicators like the Relative Strength Index (RSI) have reached deeply oversold levels, a condition that has historically preceded strong recovery rallies.
However, this optimistic view is balanced by significant near-term risks. The market structure remains fragile, and derivatives data shows traders are aggressively positioning for further downside, with put options at a $75,000 strike price gaining prominence. The path to recovery likely hinges on a stabilization of the macro environment and a return of liquidity to the market.
