Bitcoin briefly broke below $83,000 late Monday as thin liquidity, a weekend macro scare out of Japan and growing fears of a potential MSCI methodology change converged on a quick, erratic move lower.
Prices hovered above $85,000 in Asian hours on Tuesday morning, with XRP, ether Cardano’s ADA, Solana’s SOL and BNB Chain’s BNB show losses of up to 2%.
Market participants said the decline had little to do with the usual macro triggers and far more to do with the market’s inability to absorb even modest stress in the current environment.
“Bitcoin’s fall below $90,000 is the result of a collision between the fragile market structure and weak liquidity conditions observed over the weekend,” said Farzam Ehsani, CEO of crypto exchange VALR.
“Pressure across the markets intensified because the order book was shallow and the market lacked sufficient depth to withstand another macroeconomic liquidity shock,” he added.
Some traders are increasingly focused on a separate structural issue: MSCI’s pending decision on whether to exclude companies whose balance sheets are heavily concentrated in cryptocurrencies from its global indexes.
The proposal affects companies that collectively hold more than $137 billion in digital assets — including Strategy, Marathon, Riot, Metaplanet and American Bitcoin — representing about 5% of all bitcoin in existence.
Ehsani said the market is already trying to price in the possibility of forced flows from index funds should any of these companies be reclassified.
“Any rule change automatically triggers a review of their holdings, potentially leading to forced divestments of these companies’ shares and triggering significant capital outflows,” Ehasani said. Investors, he added, are now preparing for “short-term imbalances associated with forced capital flows.”
December’s poor start also capped a weak November for bitcoin, which ended down 17.5% in one of its biggest monthly declines in three years.
A sustained break below around $80,500 would open the door to a deeper move towards the $64,000 technical target that some traders have seen.
“If the market continues to decline, Bitcoin may test the $60,000-$65,000 range. At these levels, large institutional players, including Strategy’s potential competitors, may become interested in buying large amounts of Bitcoin,” Ehsani added.
Outside of bitcoin, US-listed crypto ETFs continued with selective approaches. Solana funds have now recorded five weeks of net buying, adding more than $600 million since the end of October. Spot XRP ETFs also crossed $666 million in cumulative inflows.
On-chain data from CryptoQuant and Glassnode suggest that leverage has been drained from the system, easing some structural risk, but not enough to offset the current macro and index-related uncertainty.
