Bitcoin Critical Moment: The early morning is crucial; liquidity crisis exposes market fragility

Thursday’s crypto market once again validated an old adage—the early morning determines the day. Bitcoin fell below the $87,000 mark within just a few hours, currently trading around 87.68K, with a change of only +0.22%. Behind this seemingly mild figure lies the true reflection of market liquidity exhaustion.

Order Book Breakdown Leads to Increased Price Fragility

The root cause of this decline is not deteriorating fundamentals but a terrifying wave of leverage liquidations in October. A single-day forced liquidation of $19 billion completely destroyed the market’s buffer mechanism—the order books on major trading platforms have never fully recovered.

As a result, Bitcoin’s sensitivity to capital flows has risen to dangerous levels. Mild sell-offs that the market once easily absorbed now can trigger chain reactions. This fragility has become the dominant factor in every price fluctuation, with each dip feeling like walking a tightrope—without a safety net.

Whale Movements and the Self-Fulfilling Prophecy of the Four-Year Cycle

James Butterfill, Head of Research at CoinShares, revealed the hidden driver behind the market—large holders (whales) engaging in massive sell-offs. Since September, these institutional investors have unloaded over $20 billion in assets. They follow the four-year crypto cycle logic, which coincides with the decline phases.

Although this theory is hard to justify fundamentally, it has become a “self-fulfilling prophecy”—more and more participants trade based on this expectation, ultimately driving prices down. This is the most bizarre aspect of market psychology.

Technical Support Levels and Options Traders’ Defensive Lines

After Bitcoin dropped below $87,000, options traders immediately shifted their focus to the next support level—$85,000. According to options data from Deribit under Coinbase, the most concentrated downside protection demand is around the $85,000 level, followed by $82,000.

These key levels are not set arbitrarily but reflect market participants’ concentrated risk hedging. Once below $85,000, $82,000 will become the ultimate line of defense.

US Stock Volatility and Loss of Confidence in Risk Assets

Wall Street’s instability directly impacted Bitcoin’s trend. Although Nvidia’s impressive earnings temporarily boosted US stocks significantly, this rally quickly evaporated. Concerns over AI valuations and doubts about whether the Federal Reserve will cut rates in December have plunged the entire risk asset market into uncertainty.

The crypto market is trapped in its own cycle—leverage liquidations and waning retail demand continue to spiral in a vicious cycle, with this cross-asset divergence becoming increasingly evident since early October.

Investor Fear in a Policy Vacuum

Jake Ostrovskis, Head of OTC at Wintermute, stated plainly that the biggest suppressing factor now is not specific bad news but the uncertainty caused by a data vacuum. The Federal Reserve’s policy direction remains uncertain, and this sense of the unknown can destroy investors’ risk appetite more than any confirmed negative news.

In this atmosphere, Bitcoin, as a high-risk asset, bears the brunt. The market is waiting for a clear signal, but until that arrives, prices will continue to face downward pressure. Every rebound is likely an opportunity for whales to offload, and every dip could trigger a new wave of liquidations.

Bitcoin’s current predicament is a perfect illustration of “the early morning determines the day”—each dawn could decide the trend for the entire day, and the market is at its most dangerous moment right now.