Bitcoin extended its slide in the early hours of Friday, sinking toward the mid-$80,000 range as a wave of selling from long-dormant wallets, a sudden shift in global rate expectations, and increasingly bearish derivatives positioning combined to rattle the crypto market.
BTC fell below $85,500 on Friday morning Hong Kong time, according to CoinDesk data, marking a fresh seven percent drop in 24 hours and leaving the world’s largest cryptocurrency down more than 20 percent over the past month.
Market makers say the downturn is being driven primarily by a surge of old coins hitting centralized exchanges.
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In a note circulated on Telegram, liquidity provider FlowDesk said the market has been absorbing a heavy supply of coins from long-dormant bitcoin wallets, with tens of thousands of BTC moving after years of inactivity. These long-idle coins, often considered among the most unlikely to sell, have shifted market psychology, overwhelming bids and thinning liquidity at key support zones.
The renewed activity from old wallets has contributed to persistent sell pressure across spot markets, with managers increasingly positioned defensively into year-end. FlowDesk noted that many investors have become more focused on protecting accumulated gains than adding fresh exposure, a shift reflected in reduced spot demand and weaker support levels as BTC drifted lower through the week.
Derivatives markets are reinforcing the bearish tone. FlowDesk observed that options traders are aggressively rolling their put positions further down the curve to maintain downside protection, a move that aligns with a pronounced skew toward puts across major expiries.
Data from Deribit confirms the sentiment reversal. The once-dominant $140,000 call has been eclipsed by the $85,000 put, now the single largest open-interest strike in the entire BTC options market. The repositioning suggests traders expect further weakness as volatility curves remain heavily tilted toward downside bets.
At the same time, macroeconomic headwinds have deepened the sell-off. QCP Capital flagged a sudden hawkish repricing of Federal Reserve expectations, with traders adjusting to the likelihood of fewer rate cuts in 2026.
The revaluation has pressured risk assets broadly, though equities have held up comparatively well thanks to strong corporate earnings, particularly from Nvidia, which continued to beat back fears of an AI-driven bubble.
Crypto, by contrast, has not found similar resilience. Ethereum slid roughly 7.4 percent to around $2,800, while tokens across Layer-1, DeFi and Layer-2 ecosystems suffered double-digit declines, including steep losses in NEAR and SOON.
Analysts at VanEck attribute the severity of the downturn to heavy liquidation by medium-term Bitcoin holders, wallets that have held coins for three to five years.
According to the firm, this cohort has reduced its balances by 32 percent over the past two years, triggering a collapse in perpetual futures open interest, sharply lower funding rates, and a risk-off cascade across the market.
VanEck notes that the longest-held BTC wallets remain remarkably stable, suggesting the current sell-off is more cyclical than structural, driven by trader rotation rather than long-term capitulation.
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As Bitcoin’s slide continues, attention is turning once again to MicroStrategy, whose BTC holdings could come under market scrutiny if prices continue toward the company’s reported average break-even level of $74,430.
JPMorgan, in a recent note, said MicroStrategy’s share price has already been weighed down by concerns over a potential removal from the MSCI index in January, a move that could prompt billions in passive outflows and amplify pressure on an already fragile crypto market.
While pockets of strength emerged briefly in GameFi and select NFT-linked tokens earlier in the week, analysts say the reprieve was short-lived. With old wallets selling, derivatives tilting bearish, and macro conditions tightening, traders are bracing for further volatility, and possibly deeper downside, as year-end approaches.
