The slowdown in U.S. inflation data has led to a frenzy in the U.S. stock market, but it has not prevented Bitcoin from falling below the $86,000 mark, with the entire cryptocurrency market capitalization evaporating again during overnight trading.
On December 19, at 8 AM UTC+8, Bitcoin fell below $86,000 in the overnight market, hitting a low of $85,450.
Ethereum briefly dipped below $2,800, while SOL fell below $120. The total global cryptocurrency market capitalization has dropped below the $3 trillion mark during the overnight plunge, currently reported at approximately $2.96 trillion.
1. Market Overview
● The overnight cryptocurrency market saw a widespread decline. Bitcoin is currently priced at $85,382, down 0.68% in 24 hours. Previously, Bitcoin had broken below the critical support level of $86,000. Ethereum is currently priced at $2,825, with a slight drop of 0.02% in 24 hours. More altcoins have seen even more significant declines.
● Some altcoins have become the main drivers of the decline: PUMP and GIGGLE both plummeted by 11.41%, AXL fell by 9.3%, DOLO dropped by 8.7%, and VELODROME decreased by 8.8%.
Market panic is spreading. The cryptocurrency fear and greed index has dropped to 16, indicating an "extreme fear" zone.
2. Market Structure
● This round of correction shows a clear structural differentiation. High-risk sectors and altcoins have borne greater pressure. Among various sub-sectors, the AI concept sector led the decline with a drop of 5.34%, with Fartcoin (FARTCOIN) falling by 19.81%. The meme coin sector overall dropped by 4.76%.
● Meanwhile, Bitcoin has shown relatively strong resilience. Despite the price drop, its decline is much smaller than that of many altcoins. This differentiation indicates that as market risk aversion increases, funds are shifting from high-risk assets to relatively stable assets.
3. Reasons for the Decline
This decline is not due to a single factor but is the result of multiple pressures acting together.
● The primary pressure comes from changes in the macro monetary policy environment. The market widely expects that the Bank of Japan may raise interest rates to the highest level in thirty years, which is loosening global yen arbitrage trading. Historical data shows that in the 4 to 6 weeks following the last three interest rate hikes by the Bank of Japan, Bitcoin fell by 20% to 30%.
● At the same time, after the Federal Reserve completed its first rate cut, the subsequent path remains unclear, and the market has begun to actively lower its expectations for liquidity in 2026.
● On-chain data also reveals direct pressure. On December 18, net inflows to Bitcoin exchanges reached 3,764 BTC, marking a peak and clearly indicating that large holders are concentrating on recharging and preparing to sell.
● Signs of selling have also appeared at the miner level. The overall Bitcoin network has seen a significant drop in hash rate. According to F2pool data, as of December 15, the Bitcoin network hash rate was reported at 988.49 EH/s, down 17.25% from the previous week.
Market analysis suggests that a large number of Bitcoin miners may have shut down recently, forcing miners to sell Bitcoin during a liquidity tightening period.
4. Divergence from U.S. Stocks
In stark contrast to the weakness in the cryptocurrency market, U.S. stocks collectively rose overnight.
● The Dow Jones Industrial Average rose by 0.14%, the S&P 500 index increased by 0.79%, and the Nasdaq Composite Index performed particularly strongly, surging by 1.38%. Large tech stocks generally rose, with Tesla up over 3% and Nvidia nearly 2%. This rally was mainly boosted by the easing inflation data. The U.S. core CPI in November grew by 2.6% year-on-year, the lowest growth rate in four years, which is favorable for the Federal Reserve's rate cuts next year.
● However, cryptocurrencies did not follow the rebound in U.S. stocks, instead falling back after a brief surge. Bitcoin briefly rose above $89,400 before the U.S. stock market opened, but turned downward towards the end of the early trading session, dropping below $85,500 by midday.
This divergence highlights the liquidity pressures and risk aversion currently faced by the cryptocurrency market.
5. Differentiation in Concept Stocks
U.S. cryptocurrency concept stocks showed mixed performance, failing to form a unified trend.
● Strategy (MSTR) fell by 1.33%, Coinbase (COIN) dropped by 2.04%, and MARA Holdings (MARA) decreased by 2.4%. However, Riot Platforms (RIOT) rose against the trend by 3.24%, and Circle (CRCL) also increased by 2.38%.
● Notably, shares of Trump Media & Technology Group (DJT) soared by 41.9% on merger news. The company announced it would merge with TAE Technologies, a fusion energy company supported by Alphabet, in an all-stock transaction valued at over $6 billion.
● The merged company plans to site and begin construction of the world's first utility-scale fusion power plant by 2026. This news has sparked market enthusiasm for disruptive energy technologies but has not benefited the cryptocurrency sector.
6. Outlook
Technical analysis shows that Bitcoin currently has key support in the $85,800 to $86,000 range, which is an important psychological level.
● If this support area is effectively broken, Bitcoin may further test the $82,000 to $84,000 range, or even challenge the historical demand zone of $78,000 to $80,000. Momentum indicators show that the market is approaching an oversold area, and a technical rebound may occur in the short term.
● For the entire cryptocurrency market, the $2.87 trillion market capitalization level constitutes short-term support. The market needs to stabilize above $2.93 trillion to begin the path back to the $3 trillion mark.
● On a macro level, the next direction of the market will heavily depend on the policy coordination of major global central banks. Analysts point out that the current global monetary policy is in a "highly differentiated, difficult-to-form consensus phase," and this "non-unified liquidity environment" is often more damaging than clear tightening.
Bitcoin prices are hovering around the $85,000 edge, with traders holding their breath for the next directional breakout. The correlation between cryptocurrencies and U.S. tech stocks has risen to a high of nearly 0.9, but the movements of the two were completely opposite last night.
Market expectations for the Bank of Japan's interest rate hike hang like a sword over the market, while the fog surrounding the Federal Reserve's rate cut path has yet to clear. Amid rumors of shutdowns at Xinjiang mining farms and large on-chain transfers, the crypto world is undergoing a test of liquidity tightening.
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