Bitcoin News Today: Global Liquidity Squeeze and Stablecoin Doubts Spark Crypto Sell-Off

Bitcoin's recent sell-off has deepened amid dual pressures from a global liquidity crunch triggered by Japan's bond market turbulence and growing fears over the stability of Tether's (USDT) dollar peg. The cryptocurrency market lost nearly $140 billion in value on December 1, 2025, as Bitcoin fell below $86,000 for the first time in months and altcoins suffered steeper declines. According to S&P Global Ratings, the stablecoin's stability was downgraded to "weak," raising concerns about its ability to maintain its 1:1 peg to the U.S. dollar.

The yen carry trade, which has underpinned global liquidity for nearly three decades, began to unravel as Japan's 10-year government bond yield surged to 1.84% on November 30 - its highest level since April 2008. This marked a dramatic reversal for the Bank of Japan, which had kept rates near zero for years to stimulate its economy. Governor Kazuo Ueda's hint of a potential rate hike at the December meeting sent shockwaves through global markets, prompting capital to flow back into Japan and tightening liquidity worldwide. For crypto markets, the impact was immediate. Leveraged traders faced rapid liquidations as volatility spiked, with over $640 million in positions wiped out in a single 24-hour period.

Compounding the sell-off, S&P Global Ratings downgraded Tether's USDT to "weak" from "constrained," citing its increased exposure to high-risk assets like Bitcoin and gold. At 5.6% of USDT's reserves, Bitcoin now exceeds the 3.9% overcollateralization buffer, meaning the stablecoin's reserves could no longer absorb losses if the cryptocurrency's value declines further. S&P also criticized Tether for limited transparency regarding custodians and reserve management, warning that a drop in Bitcoin's price combined with losses in other risky assets could push USDT into an undercollateralized state. Tether has dismissed the downgrade but faces mounting scrutiny from regulators and traders.

The dual pressures have amplified macroeconomic risks for crypto markets. While USDT remains a critical infrastructure for trading, its stability is now in question, particularly in regions like China, where over 20 million traders rely on the stablecoin despite the country's 2021 crypto ban. Meanwhile, the yen carry trade's collapse signals a broader shift in global liquidity, with analysts suggesting that the era of ultra-low rates may be ending. This has forced a repricing of risk across asset classes, from equities to commodities, as investors reassess exposure to leveraged positions and duration bets.

Bitcoin's recent stabilization near $87,000 amid rising rate-cut expectations from the Federal Reserve offers some respite, but the interplay between macroeconomic shifts and crypto-specific vulnerabilities remains a key challenge. As Japan's bond market continues to dictate global liquidity conditions and Tether's reserves face closer scrutiny, the sector's resilience will be tested. For now, the sell-off underscores the inextricable link between crypto markets and broader financial systems, where a single shock in one corner of the world can reverberate across the entire digital asset ecosystem.