Bitcoin News Today: Structural Liquidity Crisis and Leverage Trigger $637M Crypto Sell-Off

Bitcoin, Ethereum, and XRP plunged in early December, triggering $637 million in liquidations across crypto derivatives markets as leverage and thin liquidity amplified a sharp sell-off. Bitcoin fell 5% in 24 hours, hitting an intraday low of $85,694, while Ethereum and XRP dropped 5.6% and 6.5%, respectively. The selloff pushed the total crypto market cap below $3 trillion, according to CoinGlass data, with nearly $568 million in long positions liquidated. Analysts attributed the crash to a cascade effect of forced liquidations, thin weekend liquidity, and speculative concerns over Tether's stability.

The immediate catalyst was Strategy CEO Phong Le's comments that the firm could sell Bitcoin to fund dividend payments if its stock's multiple-to-net-asset-value (mNAV) drops below 1x. Strategy holds 649,870 BTC, worth $56.26 billion at current prices. Wenny Cai of SynFutures noted that such statements from major BTC holders "change investors' perceived supply dynamics," exacerbating panic. Meanwhile, Tether's potential insolvency risks, highlighted by BitMEX co-founder Arthur Hayes, added to the sell-off. Hayes warned that a 30% decline in Tether's equity could render the stablecoin insolvent, widening liquidity premiums and further fueling volatility.

Structural market conditions worsened the downturn. Coinpedia.org reported that $400 million in long liquidations occurred within an hour, driven by high leverage and thin liquidity during weekend trading. Analysts emphasized that the crash was not fundamentals-driven but rather a "structural liquidity flush" from excessive leverage. "This looks like another liquidity flush rather than a fundamental breakdown," Cai said, noting that volatility is likely to persist until liquidity returns.

Despite the turmoil, long-term investors remain cautiously optimistic. Myriad prediction market users assign only a 5% chance to Strategy selling its Bitcoin before year-end. Bitcoin Munari, a new presale project, highlighted fixed-supply models as a stable alternative during volatile periods, with its Solana-based token offering attracting attention amid market uncertainty.

Looking ahead, Cai expects a "choppy, volatile" December, with potential near-term washouts pressuring leveraged positions before institutional buyers re-enter. The Federal Reserve's shifting rate-cut expectations-now at 80% for December-also complicate the outlook. While the immediate bearish sentiment persists, the market's resilience in stabilizing above $87,000 suggests underlying demand remains intact.