Bitcoin plunged more than 8% in a matter of hours on Monday, dropping below the psychologically important $86,000 level for the first time since early November. The sudden sell-off triggered a cascade of liquidations across major exchanges, with over $1.02 billion in leveraged positions wiped out in the past 24 hours, according to data from Coinglass. Of that total, approximately $920 million came from long positions — traders betting on further price increases who were caught wrong-footed by the rapid reversal.
The move marked Bitcoin’s worst single-day percentage drop since the FTX collapse in March 2023 and served as a brutal reminder that even after reaching an all-time high above $108,000 just two weeks ago, the cryptocurrency market remains extraordinarily volatile.
What Sparked the Sell-Off?
Several converging factors appear to have fueled the downturn:
- Macro Risk Aversion Returns U.S. Treasury yields spiked after stronger-than-expected ISM manufacturing data reduced expectations for aggressive Federal Reserve rate cuts in 2025. The 10-year yield briefly topped 4.55%, its highest level since May, prompting a flight from risk assets including equities and cryptocurrencies.
- Year-End Profit Taking and Tax Harvesting With Bitcoin up roughly 120% year-to-date, many institutional and high-net-worth holders chose to lock in gains before December 31. On-chain analytics firm Glassnode reported that long-term holders moved over 45,000 BTC to exchanges in the past week — the highest weekly inflow since the March 2024 peak.
- Mt. Gox Repayments Resume Creditors of the defunct Mt. Gox exchange began receiving additional Bitcoin and Bitcoin Cash distributions this week. Although the amounts are relatively small compared to daily trading volume, the psychological impact of “ancient” supply re-entering the market remains significant.
- Leverage Had Reached Extreme Levels Open interest in Bitcoin perpetual futures had climbed to a record $68 billion across centralized exchanges, with funding rates persistently above 100% annualized on platforms like Binance and Bybit. Such conditions almost always precede sharp deleveraging events.
The Liquidation Cascade
The pain was most acute for over-leveraged bulls. Coinglass data shows that more than 285,000 traders were liquidated in the past day, the highest single-day figure since August 5 (“Black Monday” for crypto). The single largest liquidation order — a $52 million long position on Binance — occurred on Hyperliquid at 14:22 UTC when BTC/USD briefly hit $84,200.
Ethereum, Solana, and most major altcoins suffered even steeper percentage declines, with the TOTAL crypto market capitalization shedding nearly $420 billion from Sunday’s peak.
Market Reaction and Outlook
Exchange outflows spiked immediately after the crash, with over 28,000 BTC withdrawn to self-custody wallets in the past six hours — a classic sign that long-term holders view the dip as a buying opportunity rather than the start of a deeper bear market.
Prominent analysts offered mixed interpretations:
- Veteran trader Peter Brandt noted that Bitcoin remains in a higher low and higher high trend on the weekly chart, suggesting the macro uptrend is intact unless $74,000 breaks.
- On-chain analyst Willy Woo pointed out that the current correction mirrors the mid-cycle pullbacks seen in 2017 and 2021, both of which preceded the strongest phase of the bull market.
- Conversely, derivatives desk QCP Capital warned that implied volatility has exploded to levels last seen during the March 2023 banking crisis, indicating the market expects continued turbulence.
As of press time, Bitcoin has recovered slightly to around $88,500, but trading volume remains elevated and bid-ask spreads are wide — classic hallmarks of an unsettled market.
For now, the crypto community is left nursing losses and debating whether this was a healthy flush of excess leverage or the beginning of a more prolonged drawdown. One thing is certain: in Bitcoin’s 16-year history, $1 billion liquidation days have rarely been the final word.
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