The pullback in crypto markets continued on Wednesday, as overall capitalization fell below $3 trillion for the third time in a month, testing a level that could open the door to further weakness.
Selling pressure has been concentrated on large-cap assets, particularly those with active ETF exposure, suggesting a shift in institutional positioning rather than widespread retail capitulation.
Bitcoin slipped 1.5% to $86,580, partly reversing Tuesday’s gain. The weakness weighed on the broader crypto market, halting XRP’s (XRP) rally at around $1.90. Ether fell back to $2,930 from the overnight high of around $2,980, according to CoinDesk data.
These major tokens, which benefited the most from institutional inflows earlier this year, are now leading the decline as sentiment cools.
According to Alex Kuptsikevich, chief market analyst at FxPro, major coins are increasingly “victims of a shift in institutional sentiment” as investors reevaluate their risk exposure at year-end.
BTC’s weak tone contrasted with moderate gains in major Asian stock indexes such as Hang Seng, Shanghai Composite, Kospi and IDX, which mainly drew strength from expectations of fiscal stimulus from Beijing after a string of weak economic numbers in November.
Meanwhile, the dollar index recovered to 98.30 from a 2.5-month low of 97.87 hit on Tuesday after US jobs data showed the economy added 64,000 jobs in November – above the 50,000 expected – while unemployment unexpectedly jumped to 4.6%, its highest since 2021.
A rising dollar generally weighs on BTC and other dollar-denominated assets like gold, although at the time of writing the yellow metal is trading above $4,300 an ounce.
Cryptocurrency sentiment deteriorates
Market sentiment has deteriorated sharply in line with price developments. The crypto Fear and Greed Index fell to 11, its lowest level in precisely one month, firmly inside the fear zone.
Unlike the short-lived pullbacks in February and April, the current decline shows signs of being more than a routine correction, with several large-cap assets surpassing intermediate technical support levels.
From a technical perspective, the next notable support area lies near $81,000, where November lows converge with March consolidation levels. A deeper retracement would expose the broader $60,000-$70,000 region, a historically important area that previously served as resistance during the 2021 and 2024 cycles.
Low liquidity
Liquidity conditions add to the pressure. FlowDesk data shows a decrease in market depth as the end of the year approaches, with leverage remaining subdued as traders close positions and reduce exposure. Decreased liquidity has amplified price movements, particularly during U.S. trading hours, while overall trading volumes remain historically low.
On-chain data presents a mixed context. CryptoQuant suggests that Bitcoin’s recent rally may have petered out, opening the door for a deeper correction phase before the next sustained advance.
At the same time, Glassnode notes that long-term accumulation continues among corporations and financial firms, extending beyond just mining companies. Strategy’s latest purchase of 10,624 BTC – almost $1 billion – indicates that selective accumulation persists even as short-term price momentum weakens.
