Bitcoin Drops Below $85K, Altcoins Follow

• Bitcoin fell below $85K, triggering a crypto selloff with Ethereum and Solana posting losses.
• Bitcoin ETFs saw outflows while XRP and Solana ETFs recorded modest gains.
• Market fundamentals remain solid, with Bitcoin’s realized capitalization hitting a record $1.125 trillion.

Bitcoin dropped sharply on Thursday, falling below key support levels and pulling the wider crypto market down. After failing to hold above $89,500, it fell below $85,000, briefly hitting $84,500 — its lowest in almost three weeks.

Other cryptocurrencies also fell. Ethereum slipped under $2,800, Solana dropped 4% to multi-month lows, and several major altcoins lost more than 5%. The sudden selloff caused heavy derivatives liquidations, wiping out nearly $562 million, mostly from long positions.

The market is now recovering slightly. Bitcoin is up 0.7% at $87,071 but is still down 5.8% for the week. Ethereum rose 3.4% to $2,924, while XRP, BNB, and Solana had small gains similar to Bitcoin.

U.S. Inflation Data Leads Short-Term Rebound

The modest recovery follows U.S. inflation data for November, which showed slower price growth. Headline consumer prices rose 2.7% year over year, below market expectations, while core inflation eased to 2.6%. The figures strengthened expectations that U.S. interest rates could decline in the coming quarters.

Related: US Inflation Surprise as Headline CPI Cools to 2.7% in November; Lifts Crypto Sentiment

Central Banks Send Conflicting Signals

While US inflation data leads to the short-term uptick, policy decisions outside the United States added uncertainty. The Bank of England cut its main interest rate by 0.25% to 3.75%, pointing to slower growth and easing inflation. Officials said future cuts will depend on economic data, limiting the positive impact on risk assets.

In Asia, attention is on the Bank of Japan, expected to raise rates to a 30-year high. Higher rates could strengthen the yen and affect the yen-carry trade, a key source of global liquidity. Past rate hikes in Japan have often coincided with Bitcoin price drops.

ETF Flows Show Mixed Institutional Positioning

Institutional flows into crypto-linked exchange-traded funds showed a mixed pattern this week. U.S. spot Bitcoin ETFs recorded a net outflow of $161.3 million on Thursday, following strong net inflows of $457.3 million on Wednesday. 

Flows across other digital asset ETFs varied. XRP ETFs posted net inflows of $18.9 million and $30.4 million over the past two trading sessions, indicating steady interest in the token. Solana ETFs also recorded modest positive inflows of $85,000 and $107,000 during the same period.

Ethereum ETFs continued to lag. The products saw net outflows of $7,500 and $34,000 over the past two days, extending a trend of weaker institutional demand compared with Bitcoin and select alternative cryptocurrencies.

Bitcoin Fundamentals Remain Stable

Despite price swings and mixed ETF flows, Bitcoin’s long-term outlook looks solid. Its realized capitalization, a measure of coins’ value at their last transaction, hit a record $1.125 trillion, showing steady capital inflows. 

Analysts note that unlike past downturns, recent declines haven’t triggered widespread selling, suggesting limited market panic.

Options Expiry and Market Outlook

Attention is now turning to a $23 billion Bitcoin options expiry next Friday, an event that has historically increased short-term volatility. Interestingly, $2.7 billion of Bitcoin options and $475 million of Ethereum options expire today, which could increase volatility in this period. 

Related: Why the Bank of Japan’s 25 Bps Hike Could Trigger a Crypto Sell-Off

Traders are also monitoring bond yields, currency movements, and further central bank guidance as year-end approaches. Market participants expect digital asset prices to remain sensitive to macroeconomic developments and liquidity conditions in the near term.