Bitcoin drops below $85,000 as traders retreat from risk assets

The latest plunge follows a downturn that has lasted since early October in the crypto market

Bitcoin dropped below $85,000 for the first time in almost two months amid a pullback in risk assets.

The largest cryptocurrency slipped as much as 5.7% to $84,233, the lowest price since Dec. 1. Smaller digital assets fell more, with Ether, Doge, Cardano and Solana are all down at least 6% or more.

The latest plunge follows a downturn that has lasted since early October in the crypto market. Bitcoin prices had remained stagnant even when tech shares and precious metals such as gold and silver rallied in recent weeks. Yet, cryptocurrencies are mirroring a tech selloff that has dragged down stocks along with precious metals such as gold and silver.

“Today’s weakness underscores crypto’s persistent role as leveraged beta to traditional risk assets, with digital markets amplifying the broader risk-off tone as equities - particularly tech - continue to face pressure.” said Chris Newhouse, head of business development at Ergonia. “The move lower is being compounded by leveraged position liquidations as over-leveraged longs get flushed, adding mechanical selling pressure to an already fragile tape.”

Liquidations in crypto assets are accelerating amid the sharp drop with about $785 million worth of digital assets wiped out over the last 24 hours. More than half of that happened in the past four hours, according to data compiled by Coinglass.

“Derivatives positioning remains defensive.” said Jake Ostrovskis, head of over-the-counter trading at Wintermute.  Open interest for Bitcoin futures contracts on CME is hovering around yearly lows, while perpetual futures funding rates, a key measure of market sentiment, sits near neutral, signaling limited speculative conviction.