Bitcoin's Steep Fall: What's Behind the Sudden Drop?

Bitcoin's value took a nosedive recently, hitting $80, 600 and marking a 10% weekly loss. This isn't just a small blip; it's the biggest monthly drop since June 2022, with a 23% decline. The price even tested the 100-week exponential moving average, a level not seen since October 2023. This sharp fall triggered over $1 billion in Bitcoin futures liquidations, signaling a harsh downturn. The overall crypto market hasn't been spared either. Since October, the total market cap has shrunk from $4. 2 trillion to $2. 8 trillion, a 33% drop. This rapid decline has been dubbed one of the fastest crypto bear markets ever. The selling pressure is intense, with crypto funds seeing $2 billion in weekly outflows, the largest since February. Bitcoin and Ethereum have been hit hard, with $1. 4 billion and $689 million in withdrawals respectively. Institutional investors are also pulling out, with spot Bitcoin ETF flows remaining negative. BlackRock's spot ETF is on track for its largest weekly outflow ever, close to surpassing the $1. 17 billion record from February 2025. This isn't just short-term panic; analysts are calling it a structural decline. But there's a silver lining. A macroeconomic indicator, the National Financial Conditions Index (NFCI), is trending lower. Historically, this has preceded Bitcoin rallies by four to six weeks. In October 2022, easing financial conditions led to a 94% Bitcoin rally. Similarly, in July 2024, tightening conditions signaled stress before Bitcoin surged from $50, 000 to $107, 000. Currently, the NFCI sits at -0. 52 and is still falling. A deeper move toward -0. 60 could mark an acceleration phase. Additionally, the Federal Reserve's plan to rotate mortgage-backed securities into Treasury bills in December could inject liquidity, similar to the 2019 "not-QE" event that preceded a 40% Bitcoin rally. If the NFCI continues to decline into mid-December, it could signal the start of a new liquidity expansion window. Based on past trends, Bitcoin's next major move could align with early to mid-December 2025, offering a potential turning point for market participants.