The world’s leading cryptocurrency is navigating turbulent waters. Having retreated from its October peak, Bitcoin has now slipped below the psychologically significant $90,000 threshold this week, marking a decline of approximately 28%. This downturn is being driven by a confluence of factors: a restrictive monetary policy stance, rising global interest rate anxieties, and a concurrent slump in technology stocks.
ETF Flows Paint an Inconsistent Picture
Investment flows into Bitcoin exchange-traded funds (ETFs) have been highly volatile in recent sessions, reflecting market uncertainty:
* On December 12, inflows totaled $49.1 million.
* The previous day, December 11, saw outflows of $77.5 million.
* December 10 recorded a substantial influx of $223.5 million.
* On December 9, inflows amounted to $151.9 million.
A critical point of concern lies in the cost basis of institutional ETF investors, which averages around $80,000. With current prices, roughly 38% of all ETF holdings—equivalent to about 600,000 BTC—are now underwater. The cushion protecting the market from this aggregate breakeven level has shrunk to just 12%, a figure well below the historical average buffer of 28%.
The Federal Reserve Delivers a Hawkish Surprise
Market expectations have been upended by the latest communications from the U.S. Federal Reserve. While Chair Jerome Powell delivered a widely anticipated 25-basis-point rate cut, he simultaneously signaled a potential pause until January 2026. The central bank’s updated projections now point to only two additional rate reductions next year, down from three previously forecast.
This unexpectedly cautious posture is weighing heavily on digital assets. Bitcoin’s correlation with the Nasdaq 100 has surged to over 0.72, reaching a notably high level. The asset has shown a tendency to move in lockstep with technology equities, declining whenever they face pressure. In the wake of the Fed’s announcement, the Bitcoin Bull Score Index—a significant on-chain metric—plummeted to zero.
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A Dual Headwind from Japan
Compounding the pressure, the Bank of Japan is generating additional headwinds. Plans are underway for the Japanese central bank to lift interest rates to 75 basis points, which would represent the highest level in three decades. This policy shift carries direct implications for cryptocurrency markets: rising Japanese financing costs are forcing hedge funds to unwind carry-trade positions. Historically, a strengthening yen has correlated with declining Bitcoin valuations.
The yen is currently trading near 156 against the U.S. dollar. Any further appreciation of the Japanese currency could trigger additional selling pressure across crypto assets.
Technical Outlook and Market Sentiment
From a technical perspective, conditions remain tense. A sustained break below $89,000 would bring the $80,000 region—the foundational cost level for institutional buyers—into sharp focus. The next substantial support zone is identified between $65,000 and $70,000, where approximately 15.2% of institutional capital is concentrated.
On-chain analytics reveal that 55% of the Bitcoin supply remains in a profitable state. For context, during the 2022 bear market, this figure fell to just 31%. However, market sentiment indicators are flashing warning signs. The Fear & Greed Index has collapsed to 23 out of 100, signaling extreme fear among participants. Furthermore, long-term holders divested more than 400,000 coins in November that they had held for over a decade.
The path forward for Bitcoin hinges on whether it can reclaim the $90,000 zone or if the current correction deepens. The evolving stance of the Federal Reserve and the trajectory of ETF inflows will be decisive factors in the coming weeks.
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