The cryptocurrency market was thrown into further panic on Tuesday as a broad-based selloff intensified, sending prices sharply lower and triggering massive liquidations across major digital assets.
Bitcoin, the world's largest cryptocurrency, fell nearly four percent to below the $86,000 level, a sharp retreat from its record high above $126,000 reached in early October.
Ether is down more than four percent to trade below $3,000, while losses have spread sharply across nearly every major crypto segment, including Layer 1 and Layer 2 tokens, decentralized finance (DeFi), payments-focused projects, and centralized finance (CeFi) platforms.
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The recession led to massive forced selling, with nearly $583 million liquidated in the last 24 hours, data shows. This wipeout was largely tilted towards long positions, underscoring how aggressive the bullish bets were as prices broke through key technical support levels. Tokens associated with the decentralized physical infrastructure network (Dpin) led the selloff, falling by about six percent on average.
Market psychology deteriorated rapidly along with prices. The Crypto Fear and Greed Index fell to 11, a level typically associated with extreme fear and panic-driven trading behavior, reflecting rising expectations of further declines in the near term.
Technical indicators are strengthening the bearish outlook. Data from TradingView revealed that 75 of the top 100 cryptocurrencies by market cap are now trading below both their 50-day and 200-day simple moving averages (SMA), a widely viewed sign of a continued downtrend.
Leading assets such as Bitcoin, Ether, Solana, BNB and XRP, which together account for about 78 percent of the nearly $3 trillion crypto market, are all underperforming these key trend lines, dampening broader market sentiment.
When assets fall below the 50-day and 200-day averages, traders often view it as confirmation that bearish momentum is strengthening, increasing the risk of a quick decline as stop-loss orders are triggered and risk aversion decreases.
In contrast to the weakening crypto market breadth, equity markets have shown greater resilience. Only 29 stocks in the Nasdaq 100 traded below both their 50-day and 200-day averages on Tuesday, highlighting the disconnect between digital assets and technology equities. Bitcoin has historically shown a strong correlation with US tech stocks, often extending declines during risk-free periods.
Institutional flows are also pointing towards increasing caution. US spot crypto exchange-traded funds (ETFs) recorded huge net outflows last day, a sign of waning investor appetite.
The Bitcoin Spot ETF saw $357.6 million withdrawn from the market due to significant withdrawals from Fidelity's FBTC, Bitwise's BITB and Grayscale's GBTC.
Valkyrie's BRRR was the only product to register a small flow. Ethereum Spot ETFs also lost $224.94 million in net outflows, driven primarily by BlackRock's ETH and Grayscale's ETH, while several other funds recorded no new inflows.
Despite the sharp selloff, technical measures show that the market is still not at capitulation point. Only eight of the top 100 cryptocurrencies, PI, APT, ALGO, FLARE, VET, JUP, IP and KIA, are currently classified as oversold based on the 14-day relative strength index (RSI), which are already trading below the key moving averages. This shows that although prices have declined significantly, most assets have not yet reached levels typically associated with selling pressure.
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The RSI measures price momentum on a scale of 0 to 100, with readings below 30 typically seen as oversold and readings above 80 as overbought. The limited number of oversold assets suggests that many cryptocurrencies may still have room to fall before a more sustainable rebound takes shape.
For traders and investors, the combination of heavy liquidations, extreme fear readings, worsening market breadth and persistent ETF outflows is reinforcing a defensive stance as the year ends. Unless the leading cryptocurrency stabilizes above key technical levels and risk appetite improves, market participants say the crypto market is vulnerable to further downside.
