Bitcoin just dropped to around $90,000, marking its lowest level since late March and early April when it traded for around $80,000. According to Financial Times, this has wiped out $1.2 trillion in value from the crypto since it peaked at over $125,000 in October 5. Although BTC slowly dropped in value after it hit its record high, the biggest drop happened on October 10 after U.S. President Donald Trump threatened to massively increase tariffs on Chinese goods in retaliation for Beijing’s rare earth export controls. The cryptocurrency’s value went downhill after that, with Bitcoin now suffering an almost 30% loss in value from the first week of October.
Despite the current administration’s pro-crypto stance, higher interest rates from the Federal Reserve make cryptocurrency a less lucrative asset for investors. After all, a higher interest rate would offer greater returns on bonds and savings accounts, which are a lot safer than volatile tokens. And with experts now unsure if the Federal Reserve will reduce interest rates in December, there’s more incentive for BTC holders to liquidate their positions.
Analysts also say that the highly leveraged trades that some investors engage in are increasing the downward pressure on the price of Bitcoin. “Crypto investors love leverage,” said Bitwise Asset Management head of research Ryan Rasmussen to FT. “What we see time and time again is that traders get out over their skis. They think this time is different.” As BTC fell below $90,000, liquidations of short and long positions on the cryptocurrency and other top tokens reached over $1 billion in just a single day.
Another company holding large amounts of Bitcoin says that the drop in value isn’t a crash, but just over-leveraged investors selling their holdings. “What we are seeing now is not a collapse in crypto markets. It is the extended aftershock of October’s liquidation event,” CEA Industries chief David Namdar said. “The scale is different this time because positions are larger, leverage ran deeper, and the unwind takes longer. The fundamentals have not changed.”
This means that while short-term investors were badly hit by these big fluctuations in the price of BTC, those who HODL shouldn’t have anything to worry about. We’ve recently seen a whale holding on to 80,000 BTC purchased 14 years ago transfer nearly $8 billion worth back in July, with another user sold their holdings a couple of weeks later, netting them an 18 million percent return on their investment.
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