Bitcoin price erased recent gains, shedding nearly 5% to below $87,000 in early Asian trading hours on Dec. 1.
This came as a surge in Japanese government bond yields triggered a broad risk-off sentiment, shattering a fragile, low-volume market structure.
According to CryptoSlate data, BTC fell from a consolidation range near $91,000, wiping out approximately $150 billion in total crypto market capitalization.
Japan’s carry-trade repricing set the decline in motion, but trading volume data showed that the selloff worsened due to a market running on minimal liquidity
According to 10x Research, the crypto market had just delivered one of its lowest-volume weeks since July, leaving order books dangerously thin and unable to absorb institutional selling pressure.
So, Bitcoin’s decline wasn’t just a reaction to headlines but a structural failure at a key resistance level.
The volume vacuum
Beneath the surface of Bitcoin’s $3.1 trillion market cap, which rose 4% week-over-week, liquidity seems to have evaporated.
Data from 10x Research indicates that average weekly volumes have plummeted to $127 billion. Bitcoin volumes specifically were down 31% at $59.9 billion, while ETH volumes collapsed 43%.
This lack of participation turned what could have been a pretty standard technical correction into a liquidity event.
Timothy Misir, head of research at BRN, told CryptoSlate that this was “not a measured correction.” Instead, he painted it as a “liquidity event driven by positioning and macro repricing.”
He further observed that momentum “abruptly flipped” after a messy November, creating a deep gap lower that flushed leveraged longs. November was Bitcoin’s worst-performing month this year, losing nearly 18% of its value.
As a result, the shallow market depth meant that what might have been a 2% move during a high-volume week turned into a 5% rout during the illiquid weekend window.
A tale of two leverages
The current price decline has led to a significant number of liquidations, with nearly 220,000 crypto traders losing $636.69 million.
Still, the selloff also exposed a dangerous divergence in how traders are positioned across the two most significant crypto assets.
10x Research reported that Bitcoin traders have been de-risking, while ETH traders have been aggressively adding leverage. This has created a lopsided risk profile in the derivatives market.
According to the firm, Bitcoin futures open interest decreased by $1.1 billion to $29.7 billion leading up to the drop, with funding rates rising modestly to 4.3%, placing it in the 20th percentile of the last 12 months.
This suggests the Bitcoin market was relatively “cool” and that exposure was unwinding.
On the other hand, ETH is now flashing warning signals.
Despite network activity being essentially dormant, with gas fees sitting in the 5th percentile of usage, speculative fervor has overheated.
Funding rates surged to 20.4%, placing the cost of leverage in the 83rd percentile of the past year, while open interest climbed by $900 million.
This disconnect, where Ethereum is seeing “frothy” speculative demand despite a collapsing network utility, suggests the market is mispricing risk.
Macro triggers
While market structure provided the fuel, the spark arrived from Tokyo.
The 10-year Japanese government bond (JGB) yield climbed to 1.84%, a level unseen since April 2008, while the two-year yield breached 1% for the first time since the 2008 Global Financial Crisis.
These moves have repriced expectations for the Bank of Japan’s (BOJ) monetary policy, with markets increasingly pricing in a rate hike for mid-December. This threatens the “yen carry trade,” where investors borrow cheap yen to fund risk assets.
Arthur Hayes, co-founder of BitMEX, noted that the BOJ has “put a December rate hike in play,” strengthening the yen and raising the cost of capital for global speculators.
But the macro anxiety isn’t limited to Japan.
BRN’s Misir points to Gold’s continued rally to $4,250 as evidence that global traders are hedging against persistent inflation or rising fiscal risks. He noted:
“When macro liquidity tightens, crypto, a high-beta asset, often retests lower bands first.”
With US employment data and ISM prints due later in the week, the market faces a gauntlet of “event risk” that could further strain the already low liquidity.
Retail distress and on-chain reality
The fallout has damaged the technical picture for Bitcoin, pushing the price below the “short-term holder cost basis,” a critical level that often distinguishes between bull market dips and deeper corrections.
On-chain flows paint a picture of distribution from smart money to retail hands.
According to BRN analysis, accumulation by long-term holders and large wallets has decelerated. In their place, retail cohorts holding less than 1 BTC have been buying at “distressed levels.”
While this indicates some demand, the absence of whale accumulation suggests institutional investors are waiting for lower prices.
Misir said:
“The main takeaway is that supply has shifted closer to stronger hands, but supply-overhang remains above key resistance bands.”
However, there is quite a bit of “dry powder” on the sidelines. Stablecoin balances on exchanges have risen, signaling that traders have capital ready to deploy. But with Bitcoin futures traders unwinding and ETFs largely offline during the weekend drop, that capital has yet to step in aggressively.
Considering this, the market is now looking at the mid-$80,000s for structural support.
However, a failure to reclaim the low-$90,000s would signal that the weekend’s liquidity flush has further to run, potentially targeting the low-$80,000s as the unwinding of the yen carry trade ripples through the system.
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