Bitcoin extended its November collapse on Friday, sliding below $85,000 for the first time since April as a cascade of leveraged liquidations and collapsing sentiment deepened what is shaping up to be the worst monthly drawdown since the 2022 crypto winter.
The world's largest cryptocurrency briefly touched $81,600 before stabilizing near $84,000, erasing its year-to-date gains and putting the market back at levels last seen before January's ETF boom. The dramatic selloff has wiped approximately nearly $2 billion in positions across derivatives markets in a single 24-hour period, with nearly 400,000 traders caught in the downdraft.
The damage is spreading far beyond Bitcoin. Ethereum dropped below $2,750, down almost 14% in the past week, while Solana slid over 10% in 24 hours. XRP, BNB, and Cardano all posted declines between 8-15%. In total, major cryptocurrencies have retraced 20-35% from their November highs, with smaller-cap altcoins faring considerably worse.
The sell-off coincides with nearly $2.02 billion in liquidations over the past 24 hours, according to data from CoinGlass. Bitcoin accounted for $964 million of that total, followed by Ethereum at $407 million. Long positions - bets that prices would rise - made up approximately $1.63 billion of the liquidations, reflecting how overleveraged traders were caught off guard by the rapid reversal.
Roughly 396,000 traders were liquidated in the cascade, with the single largest wipeout - a $36.7 million BTC position - occurring on the Hyperliquid exchange. The liquidations represent one of the most severe deleveraging events since October's turbulence, though still short of the record $19 billion in forced closures seen during that month's "Black Friday" event.
Institutional Exodus Accelerates
Institutional flows tell an equally grim story. U.S.-listed bitcoin ETFs saw more than $900 million in net outflows on Thursday alone, marking their second-worst day since launching in early 2024. For the month of November, Bitcoin ETF outflows have reached $3.79 billion, on track to surpass the $3.56 billion exodus seen in February and become the worst month on record for the products.
BlackRock's iShares Bitcoin Trust (IBIT), the most successful Bitcoin ETF, has seen $1.26 billion exit its fund so far this month - the largest redemption period since the product's January 2024 debut. The outflows have placed the average spot BTC ETF investor underwater for the first time, according to market data, as Bitcoin has shed more than $20,000 in just ten days.
Open interest in perpetual futures has fallen 35% since October's peak near $94 billion, further reducing liquidity across the board. The combination of ETF redemptions and collapsing derivatives positions suggests institutions and sophisticated traders are fleeing risk assets amid broader economic uncertainty.
Sentiment Plunges to Extreme Fear
Retail sentiment is deteriorating just as quickly. The Crypto Fear & Greed Index plummeted to 11 on Monday - deep within "extreme fear" territory and its lowest reading since late 2022. The metric, which measures market sentiment on a scale from 0 to 100, has remained in extreme fear for multiple consecutive days, marking the longest streak since the FTX collapse in November 2022.
Historically, such extreme levels have preceded major swing lows and often represented contrarian buying opportunities. However, with Bitcoin now breaking multimonth support levels and institutional flows reversing sharply, the market has yet to show any convincing signs of stabilization. Technical analysts note that Bitcoin has lost critical support at the $100,000 psychological level and now trades below its 20-day and 50-day exponential moving averages.
"Bitcoin and crypto are trading much more like classic risk assets right now. Everything is moving with broader risk sentiment and growing anxiety around credit," Greg Magadini, director of derivatives at Amberdata, told reporters this week.
Global Risk-Off Sentiment Weighs Heavy
Conditions outside crypto are doing little to help. Global stocks have posted significant declines as doubts over extended AI-driven valuations and uncertainty about Federal Reserve policy weigh on sentiment. The cryptocurrency market's increasing correlation with traditional equities has meant that Bitcoin increasingly moves in tandem with tech stocks, amplifying losses during risk-off periods.
The Federal Reserve's recent signals that it may deliver fewer interest rate cuts in 2025 than previously anticipated have dampened enthusiasm for speculative assets. Fed Chair Jerome Powell indicated the central bank would take a more gradual approach to easing policy, given that inflation remains above the 2% target and the job market continues to show resilience.
Treasury yields initially spiked on the hawkish messaging before moderating as investors fled to safe-haven assets. The classic flight-to-safety pattern - with money flowing out of crypto and stocks into government bonds - reflects growing caution about economic growth prospects and the sustainability of recent asset price gains.
Final thoughts
Bitcoin is on track for its worst monthly performance since the string of corporate collapses that rocked the wider crypto sector in 2022. The 2022 "crypto winter" saw Bitcoin plunge 70% from its November 2021 all-time high near $69,000, triggered by the collapse of the Terra-Luna ecosystem, the bankruptcy of lenders like Celsius and Voyager, and ultimately the implosion of the FTX exchange.
While the current drawdown is less severe in percentage terms - Bitcoin remains roughly 33% below its recent October highs around $126,000—the speed and intensity of the deleveraging have caught many market participants off guard. The decline has been particularly painful for those who bought into Bitcoin's post-ETF rally earlier this year, with many now nursing significant losses.
Maja Vujinovic, co-founder and CEO of digital assets at Ethereum treasury firm FG Nexus, noted that "too many traders were using borrowed money to bet on prices going up. The next few days matter: If Bitcoin can stay above $100,000-$105,000, it might simply be a healthy reset. If not, we could see a deeper drop."
However, long-term fundamentals tell a different story. The April 2024 halving continues to constrain supply, with only 3.125 BTC created per block. Institutional infrastructure continues to build despite current turbulence, with major banks developing Bitcoin trading desks and payment companies integrating crypto capabilities. The regulatory framework is becoming clearer, and the next generation of financial products - including Bitcoin options on ETFs and more sophisticated derivatives—will provide new avenues for institutional participation.
Market analysts note that while extreme fear readings like the current level of 11 on the Fear & Greed Index often precede bottoms, history shows this level rarely marks an immediate reversal. During previous periods when the index fell below 10, Bitcoin's median 30-day return was only 2.1%, with wide variations and often extended sideways trading before meaningful recoveries began.
For now, crypto markets remain in a precarious position. The combination of technical breakdown, institutional exodus, extreme fear sentiment, and unfavorable macro conditions suggests further downside risks remain before any sustained recovery can take hold. Traders and investors will be watching closely for signs of capitulation or stabilization in the coming days and weeks.