Why Is Bitcoin Crashing This Week? - 24/7 Wall St.

Bitcoin has lost 13% in seven days and trades at $65,906, below every daily close since August 19. It's down 4.3% in 24 hours and 48% below its all-time high of $126,080. Bespoke Investment Group notes Bitcoin peaked on September 21 and now trades more than 20% below that high, calling it "deep into oversold territory." Six forces explain the drop, with three carrying most of the weight.

Rate Hike Fears and ETF Outflows

The Federal Reserve raised the top of its target range to 4% from 3.75% on September 16, its first hike since 2023. Fed funds futures now price an 89% probability of another quarter-point hike at the December 9 decision. Bond yields have climbed with those expectations, with the 10-year Treasury yield closing at 5.15% on November 13.

U.S. spot Bitcoin ETFs recorded $185 million in outflows on November 13, their seventh straight day of withdrawals. The week's outflows total about $1.07 billion. When government bonds pay high yields with almost no risk, non-interest-bearing cryptocurrencies like Bitcoin face increased competition for investment dollars.

Forced Selling and Miners Add Pressure

Exchanges liquidated $637 million in leveraged Bitcoin positions over 24 hours, with 91% being long positions that profit when the price rises. Each forced sale pushes the price lower and can trigger a chain reaction called a liquidation cascade. Mining difficulty has fallen 9.1% to about 134.8 trillion, its largest cut since June, indicating miners have switched machines off to reduce costs.

Strategy's Index Exit and Technical Breakdown

MSCI plans to drop Strategy from its global indexes on November 30, which could force index funds to sell the stock and make it harder for the company to raise cash for more Bitcoin. Strategy holds 850,364 Bitcoin, worth about $56 billion. Bitcoin now trades below all three of its widely watched moving averages: the 20-day at $76,624, 50-day at $80,558, and 200-day at $73,043.

The break below the 200-day line signals that much of the late-summer rally has reversed. Smaller cryptocurrencies performed worse, with Ethereum falling 5.1% and Solana dropping 9.1% over the same 24-hour period. Bitcoin absorbs selling better due to its deeper pool of buyers, including spot ETFs and corporate treasuries like Strategy's.

Could the Selling Ease Soon?

Bitcoin's crash is driven by rate hike fears, high Treasury yields, ETF outflows, and forced liquidations. Liquidations may be the first pressure to fade as forced selling stops once those positions close. ETF flows could turn next, with one net inflow day ending the seven-day run. The clearest test is the 200-day average; a close back above $73,043 plus a net ETF inflow before December 9 could suggest the crash ran on forced selling that's now spent.