Bitcoin Faces Sustained Selling Pressure as Key Support Test Looms

The cryptocurrency market is experiencing another wave of intense selling, with Bitcoin leading the decline. After a brief surge above $90,000 earlier this week, the digital asset plunged back to $85,500 within minutes on Wednesday, illustrating a classic and volatile "Bart Simpson" price pattern. Beneath this technical phenomenon lies a more concerning trend: long-term holders are offloading assets at a record pace, institutional exchange-traded funds (ETFs) are seeing significant outflows, and overall market sentiment has reached a nadir.

A dual force of selling is driving the downturn. On-chain analytics reveal a record rate of movement from wallets that had been dormant for years, indicating long-term investors are taking profits or exiting positions. According to data from Compass Point, a substantial 60% of the total Bitcoin supply is held in wallets valued at over $85 million, and this cohort has steadily increased its selling activity since July.

Simultaneously, institutional vehicles are witnessing capital flight. U.S. spot Bitcoin ETFs recorded net outflows of approximately $277 million on Tuesday alone. Ethereum-based ETFs faced even steeper redemptions, losing $224 million. Given that these products collectively hold around 13% of Bitcoin's total supply, their fund flows serve as a powerful sentiment indicator for the broader market.

Derivatives Wipeout Amid Extreme Swings

The sharp mid-week volatility triggered significant liquidations in the derivatives market. Over a four-hour period, leveraged positions worth $190 million were forcibly closed. Notably, the majority of these—worth $121 million—were short positions betting on price declines. This suggests many traders were caught off guard by the fleeting rally above $90,000, leading to rapid losses.

The weekly performance metrics paint a sobering picture. Bitcoin has shed roughly 8% of its value, while Ethereum has fallen by 15%. The leading cryptocurrency now trades approximately 30% below its all-time high of $126,000, which was reached in early October.

Macroeconomic Headwinds and a Shifting Narrative

External market pressures are compounding Bitcoin's challenges. Weakness in the technology sector, a traditional correlation partner, is adding to the bearish momentum. Stocks like Nvidia, Broadcom, and Oracle fell by up to 6% following news that Blue Owl Capital withdrew from financing a $10 billion data center project. The Nasdaq index dropped over 1%, and Bitcoin followed suit.

Should investors sell immediately? Or is it worth buying Bitcoin?

Adding to investor frustration is the simultaneous strength in traditional safe-haven assets. While Bitcoin declines, gold and silver are rallying to new highs, with silver posting a further 5% gain. This dynamic is directly testing the narrative that Bitcoin serves as a superior store of value or a natural hedge during periods of uncertainty.

Fear Gauge Signals Potential Inflection Point

Market sentiment, as measured by the Bitcoin Fear and Greed Index, has plummeted to a reading of 16 out of 100, squarely in "extreme fear" territory. Historically, such extreme readings have often preceded buying opportunities. However, current conditions lack the sustained demand necessary to absorb the ongoing wave of selling.

From a technical perspective, all eyes are on the crucial support band between $80,000 and $85,000. This zone represents both the average on-chain purchase price of active market participants ($81,000) and the aggregate cost basis for U.S. Bitcoin ETFs ($83,844). A sustained break below this level could potentially trigger another round of accelerated selling.

Year-End Dynamics Amplify Volatility

Analysts caution against overinterpreting the current moves, as typical year-end portfolio rebalancing, tax-loss harvesting, and reduced holiday liquidity are distorting price action. "People are winding down positions and taking a break," explained Jasper De Maere of Wintermute. "Even short-lived recoveries are being quickly sold into."

Despite the short-term turbulence, the foundational institutional framework for cryptocurrency remains robust. Harvard University's endowment fund holds BlackRock's Bitcoin ETF as its largest publicly traded position. Sovereign wealth funds in Luxembourg, Abu Dhabi, and the Czech Republic are continuing to build crypto exposures. Major financial institutions like JPMorgan maintain a long-term bullish outlook, reiterating a $170,000 price target for Bitcoin by 2026.

The coming days are critical for Bitcoin. The defense of the $80,000 support zone will determine whether the current correction is nearing its end or poised to deepen further.