What's Driving Bitcoin's Drop Below $90K: Market Dynamics Unveiled

Bitcoin has pulled back below the $90,000 level recently, reversing some of the momentum gained during Asian trading sessions. The leading cryptocurrency traded around $90.04K at press time, with the broader market showing pronounced weakness across major altcoins. Ethereum slipped to $3.02K, while XRP, Solana and Dogecoin retreated from their recent highs, dragging the overall crypto sentiment lower.

Nasdaq Weakness Triggers Bitcoin Pullback, Exposing Market Correlation

The cryptocurrency’s recent decline mirrors weakness in U.S. stock index futures, particularly the tech-heavy Nasdaq 100. As of recent trading, Nasdaq futures were down approximately 0.5% on the day, signaling a cautious tone for traditional markets. This alignment is no coincidence—Bitcoin and the broader crypto market maintain a strong positive correlation with Nasdaq, according to analysis from Wintermute. The correlation becomes even more pronounced during Nasdaq downtrends, meaning that stock market weakness directly translates into selling pressure on digital assets.

The CoinDesk 20 Index retreated to around 2,726, tracking back from earlier highs of 2,789 during the Asian trading sessions. This pullback reflects how synchronized crypto markets have become with traditional equities, particularly during U.S. trading hours.

Traders Reduce Leverage as Open Interest Contracts

The selling pressure prompted a notable shift in trader positioning, as risk appetite deteriorated. Data from Coinglass revealed that cumulative open interest in Bitcoin futures worldwide declined to approximately 533,000 BTC from the 540,000 BTC peak seen earlier. This reduction reflects traders scaling back their leveraged bets amid increased volatility and uncertainty, a defensive posture that suggests cautious sentiment despite recent bullish rallies.

The decline in open interest became evident as Bitcoin approached the $90,000 threshold. When prices initially surged to $90,000 earlier, open interest had expanded to 540,000 BTC, reflecting increased bullish positioning. The subsequent reversal and deleveraging pattern indicates that traders are reassessing risk exposure in a market prone to sharp intraday swings.

U.S. Trading Session Weakness: Tax-Loss Harvesting Complicates Recovery

An interesting pattern has emerged in recent weeks: Bitcoin and Ethereum show distinct underperformance specifically during U.S. trading hours. According to analysis from Laser Digital, this structural weakness stems primarily from year-end tax-loss harvesting flows. “Both BTC and ETH have declined 3% or more during U.S. trading sessions over the past week, while recovering during Asian hours,” Laser Digital’s analysts noted. This dynamic reflects the broader underperformance of crypto assets throughout the year compared to other global investment categories, prompting investors to lock in losses for tax optimization purposes.

The divergence between U.S. and Asian trading hours creates a structural headwind for price recovery during American market hours, even as Asian traders show renewed buying interest. This pattern underscores how macroeconomic factors beyond pure technical supply and demand can shape short-term Bitcoin movement.

Elliott Wave Analysis Points to Consolidation Ahead

John Glover, Chief Investment Officer at crypto lender Ledn and an Elliott Wave specialist, offered a more measured outlook despite near-term volatility. “The Bitcoin price chart looks very promising for higher prices in the future,” Glover stated, “but less certainty exists in the near term.” He suggested the market may trade sideways to slightly lower over the coming weeks and months, with buy opportunities potentially emerging between $71,000 and $84,000 levels.

This perspective aligns with the current risk-off environment. Traders are content to consolidate recent gains rather than aggressively chase higher levels amid macro uncertainty and rotations toward safe-haven assets.

Liquidation Wave Highlights Leverage Risks

The recent volatility resulted in substantial derivative positions being wiped out. Over $625 million in leveraged crypto positions faced liquidation in a recent 24-hour period, with losses distributed roughly evenly between long and short sellers affecting approximately 150,000 traders. Hyperliquid bore the largest impact, with a $40.22 million ETH-USD position liquidated and the exchange recording approximately $220.8 million in total liquidations, predominantly from short positions caught off guard by price rebounds.

These liquidation cascades underscore the risks inherent in aggressive leverage during choppy markets, particularly when macro uncertainty around U.S. trade policy and bond market volatility creates unpredictable swings.

Key Takeaway

Bitcoin’s recent drop below $90,000 reflects a convergence of factors: macro headwinds from U.S. stock market weakness, structural selling pressure from tax optimization, deleveraging by cautious traders, and lingering uncertainty around policy. While longer-term technicals suggest promise, near-term consolidation appears likely, with smart traders positioning defensively and selectively adding exposure at lower price levels.