Bitcoin’s Recent Decline: Unpacking the Factors Behind the Drop
The cryptocurrency market experienced a significant downturn on Sunday, with Bitcoin (BTC) price falling sharply after failing to break the $92,000 mark. The subsequent drop to $84,000 on Monday resulted in the wipeout of $388 million in bullish leveraged positions, leaving analysts searching for a clear explanation. A combination of factors contributed to the selloff, prompting traders to adopt a more cautious stance.
Some analysts initially attributed Bitcoin’s decline to the turmoil in the Japanese bond market, where 20-year bond yields climbed to their highest level in 25 years. 
Global Economic Expectations and Market Stress
Higher yields generally signal that investors are less willing to buy these bonds at current prices, whether due to inflation fears or rising government debt. Although the moves occurred on the same day, it is challenging to establish a direct connection, especially since the 30-day correlation fluctuated between positive and negative throughout the year. Market stress in Japan may also reflect deteriorating global economic expectations. Trader Jim Chanos, known for predicting the demise of Enron during the dot-com bubble in 1999, highlighted the growing risks associated with GPU-backed debt issued by artificial intelligence cloud companies in a recent interview with Yahoo Finance.
According to Chanos, “Many of the AI companies […] are just loss-making companies,” and if that doesn’t change, “there will be defaults.” The funding trend using GPUs as collateral was driven by CoreWeave (CRWV US) and was accompanied by Nvidia’s (NVDA US) major investments in the cloud sector, according to Yahoo Finance.
Regulatory Uncertainty and Stablecoin Concerns
Another source of concern came from the regulatory environment, even if it is not directly related to Bitcoin. When traders sense that governments are toughening their stance on cryptocurrencies, many investors become less willing to increase their exposure. Even without direct consequences for Bitcoin itself, the general mood can become negative. Reuters reported on Saturday that China’s central bank reiterated its tough approach to digital assets and vowed to step up its crackdown on illegal activities.
The 23 percent drop in Bitcoin price over the past 30 days has disrupted the functioning of strategic digital asset reserve companies. Until recently, they had strong incentives to issue shares at market prices and use the proceeds to buy Bitcoin. However, this approach fails when a company trades below its net asset value. Phong Le, CEO of Strategy (MSTR US), stated in an interview that the company would only consider selling its Bitcoin if mNAV remains low and all other funding options are exhausted.
In parallel, S&P Global Ratings downgraded Tether (USDT) stablecoin reserves to the lowest possible value on Wednesday. USDT soon started trading at a 0.4% discount to the official USD/CNY exchange rate in China, signaling moderate selling pressure. Analysts cited “persistent disclosure gaps” and “limited information about the creditworthiness of its custodians, counterparties or bank account providers.”
Bitcoin’s plunge to $84,000 on Monday reflects broader concerns about the stablecoin sector and fading confidence in the global economic outlook rather than a specific problem in the Japanese government bond market. For more information, visit Cointelegraph.
