Bitcoin News Today: Bitcoin Plunges to Oversold Levels as $400M in Futures Liquidations Signal Market Fragility

Bitcoin has plunged into extreme oversold territory as analysts speculate it could set new all-time highs in 2026. The digital asset faced a sharp correction after briefly reaching $90,000, pulling back to $85,000 within hours. This sharp volatility led to over $400 million in liquidations across global crypto futures markets.

The price swings were most pronounced in Ethereum, which dropped from $3,100 to $2,800 in a short period. Bitcoin also saw heavy liquidations, particularly in short positions. Over $78 million in short liquidations were recorded, according to market data.

Market observers are divided on the cause of the sudden price whipsaw. Some point to potential manipulation, while others argue that algorithms are cleaning up thin market liquidity. These moves have been exacerbated by ongoing ETF outflows, which have weakened the market's ability to stabilize quickly.

How Markets Reacted

The crypto market has seen repeated sharp swings this December, adding to investor uncertainty. On Wednesday alone, over $400 million in leveraged positions were wiped out, with the largest single liquidation reaching $11.08 million in a HYPE/USD trade. These liquidations are often underreported due to API limitations and off-exchange activity, according to industry experts.

Ethereum led the liquidation wave, with over $150 million in long positions lost. Bitcoin followed closely with $140 million in liquidations. Hyperliquid (HYPE) was hit hardest, with a total of $33 million wiped from its platform.

Meanwhile, spot Bitcoin ETFs have seen a sudden influx of capital, with over $457 million in inflows reported on Wednesday. This marked the largest single-day ETF inflow in over a month, according to data from SoSoValue.

What Analysts Are Watching

Bitcoin currently hovers near $87,000, attempting to stabilize after a volatile week. Institutional demand appears to be a key factor, with ETF inflows providing a buffer against near-term selling pressure. However, the market remains range-bound, with support near $81,000 and resistance above $95,000 according to market analysis.

Glassnode analysts note that Bitcoin must reclaim the $101,500 short-term holder cost basis before a sustained upward move can begin. Until then, the risk of further corrections remains high. The True Market Mean at $81,300 has provided support thus far, but this level may not hold if selling pressure intensifies.

Bitwise and Grayscale are among the bullish voices, forecasting a new all-time high for Bitcoin in 2026. They argue that the traditional four-year cycle has weakened, and factors like regulatory clarity and institutional adoption are shifting the market's structure. Grayscale sees rising demand for alternative stores of value as a key driver of price action, especially amid rising public debt and a weak dollar according to market analysis.

Risks to the Outlook

Despite the optimism, risks remain. Bitcoin's volatility, while lower than in previous years, is still higher than many traditional assets. For example, BTC was more volatile than Nvidia in 2025, according to Bitwise data. While the firm expects volatility to continue declining into 2026, sudden corrections could still occur if macroeconomic conditions shift.

ETF outflows remain a concern. Over the past two days, Bitcoin and Ethereum ETFs have seen net outflows exceeding $1 billion. This outflow weakens the market structure, making it harder to stabilize prices during rapid reversals.

The Options market also suggests caution, with negative readings on Deribit's 25-Delta Skew across multiple tenors. This indicates bearish positioning among options traders for the first half of 2026.

What This Means for Investors

For investors, the current environment presents both opportunities and risks. Bitcoin's price action has been highly volatile, with sharp corrections and rapid rebounds. While ETF inflows suggest strong institutional interest, the market's fragility means that sudden shifts in sentiment can trigger large liquidations.

Analysts suggest that patience is key. Bitcoin needs to absorb overhead supply and gain conviction on the buy side before a sustained move higher can begin. For now, traders should monitor support levels near $85,000 and watch for any breakouts above $95,000.

The coming months will be critical in determining whether Bitcoin can break free from its current range and set a new all-time high. Institutional flows, regulatory clarity, and macroeconomic factors will all play a role in shaping the next chapter for the world's largest cryptocurrency.