The world's largest cryptocurrency has erased its year-to-date gains, pressured by fading Fed rate-cut expectations and a broader retreat from risk assets, with traders now eyeing deeper support levels.

Bitcoin plunged below the critical $90,000 level on Tuesday, accelerating a month-long slide that has now wiped out all its gains for 2025. The token fell as much as 2.4% to trade near $91,400 in London, a stark reversal from its record high above $126,000 set in early October.

The downturn is part of a broader crypto market rout that has erased over $1 trillion in value since an early-October selloff triggered more than $19 billion in leveraged position liquidations.

Macroeconomic Headwinds and Shifting Sentiment

The reversal is largely driven by a souring of risk appetite across global markets. Key factors include:

• Dimming Fed Cut Hopes: Traders are reassessing the likelihood of a Federal Reserve rate cut in December, with odds now falling below 50%.
• Equity Market Weakness: Stock markets slipping from recent highs have contributed to the risk-off sentiment.
• Stretched Valuations: Concerns over lofty valuations in speculative assets are prompting a broad derisking.

“With Fed December rate cuts pricing below 50% chance now, crypto markets continue to grind lower after losing the important 100k level in BTC,” said Shiliang Tang, managing partner of Monarq Asset Management.

Market Mechanics Point to Further Weakness

Current market dynamics suggest the sell-off may not be over:

• Options Activity: Traders are actively seeking downside protection, with puts at the $85,000 and $80,000 strike prices dominating recent flows.
• Institutional Outflows: A group of 12 spot Bitcoin ETFs has seen net outflows of approximately $2.8 billion in November, a sharp reversal from the massive inflows seen during the rally.
• Ongoing Liquidations: Long and short positions worth about $950 million were liquidated in the past 24 hours, indicating extreme market volatility and distress.

The sell-off is also putting strain on "digital-asset treasuries"—public companies like Michael Saylor’s Strategy Inc. that amassed large crypto holdings earlier in the year—as token prices fall below key accumulation levels.

Despite the bearish momentum, some analysts see the drop as a potential buying opportunity for long-term investors. “We expect Bitcoin to see more volatility for the next few months as long-term buyers view this drop as a good opportunity, while trading institutions may derisk as global macro factors change portfolio projections,” said Nick Ruck, a director at LVRG Research.