Bitcoin Holds Key Support Amid Market Turbulence and Regulatory Shifts

Bitcoin CRYPTO000BTC

Bitcoin navigated a volatile period, successfully defending a crucial price threshold after a week of significant pressure. The leading cryptocurrency dipped below $85,000 before finding stability around the $87,000 level. This price action unfolded against a backdrop of substantial leveraged position liquidations exceeding $561 million and a pivotal interest rate decision from Japan's central bank. The market's focus now centers on whether this established support zone can endure.

Positive developments emerged from the U.S. regulatory landscape, providing a supportive counter-narrative. Michael Selig, a candidate viewed favorably by the digital asset industry, was confirmed to lead the Commodity and Futures Trading Commission (CFTC). Furthermore, reports from Bloomberg indicate that the Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange, is in discussions regarding a potential investment in the crypto payments firm MoonPay. The talks reportedly value MoonPay at approximately $5 billion.

Market structure also offers underlying support. The aggregate cost basis for U.S. spot Bitcoin ETFs is situated near $83,844, while the True Market Mean around $81,000 has consistently acted as a reliable floor since October 2023.

Bank of Japan's Measured Move Eases Fears

The Bank of Japan (BoJ) contributed to market dynamics by raising its benchmark interest rate by 25 basis points to 0.75%, marking its highest level since 1995. While significant, this moderate hike was less aggressive than the 50 to 75 basis point increase some participants had feared. The decision prompted immediate relief: the Japanese yen softened to 156.03 against the U.S. dollar, and Bitcoin experienced a brief surge from $86,000 to $87,500 before retracing.

For crypto investors, a critical takeaway is that Japanese interest rates remain substantially lower than those in the United States. This disparity prevented a large-scale unwinding of carry trades, which could have exerted considerable downward pressure on Bitcoin and other risk-sensitive assets.

Leveraged Washout and On-Chain Weakness

The most direct selling pressure originated from a cascade of forced liquidations. As Bitcoin tested the pivotal $85,000 mark, over $561 million in leveraged positions across the market were wiped out. The breakdown was as follows:

• Bitcoin: $195.82 million
• Ethereum: $148.16 million
• Hyperliquid (HYPE): $30.05 million
• XRP: $12.19 million

A single Bitcoin position on Hyperliquid, valued at $6.19 million, constituted the largest individual liquidation. Analysts at AmberData have identified the $85,000 level as critical, warning that a sustained break below it could propel prices toward $80,000.

On-chain metrics reveal underlying softness. Network activity has dwindled, with the seven-day average of active addresses falling to roughly 660,000—a yearly low last seen in December 2024 during the peak of Ordinals and Runes speculation. Miner revenue has also declined, dropping from an average of $50 million in the third quarter to about $40 million. Notably, nearly all income now stems from block rewards rather than transaction fees, signaling weak demand for Bitcoin block space.

Expanding Loss Zones and Market Indecision

A striking on-chain development is the expansion of loss positions. Currently, 6.7 million BTC are held "underwater," representing the highest level in the current market cycle. Of the 23.7% of the circulating supply in a loss position:
* 13.5% is held by short-term holders.
* 10.2% is held by long-term holders.

Data from Glassnode indicates that loss positions from recent buyers are gradually being absorbed into long-term holder wallets, a pattern often observed during transitional phases between market cycles.

Technically, Bitcoin is trading within a confined range between support at $84,969 and resistance at $90,569. Market indecision is evident in the convergence of key moving averages (the 20-day EMA at $86,997 and the 50-day EMA at $88,177) and tightening Bollinger Bands. Options market activity, as reported by Wintermute, suggests expectations of continued sideways movement, with traders selling protection below $85,000 while also capping exposure above $100,000. Large option expiries in December are likely to further suppress pronounced price movements through year-end, leaving the $85,000 level as the central pivot point for the trading sessions ahead.