Bitcoin falls 5% below $90,000 amid steep monthly losses and market selloff

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Bitcoin fell below $90,000 on Monday, as a selloff gathered pace following the steepest monthly decline since mid 2021, as renewed risk aversion drove investors out of stocks and digital assets. 

The world's largest cryptocurrency fell by as much as 6.1 per cent at one point. By 1120 GMT, it was down 5.2 per cent at $86,461, set for its biggest one-day fall in a month and hovering near last month's eight-month low of $80,553. 

Bitcoin shed more than $18,000 in November, as a record amount of money rushed out of the market, making this its largest dollar loss since May 2021, when a number of cryptocurrencies collapsed. 

RISK INDICATOR 

Given its relatively short lifespan, there is not much in the way of seasonality to guide traders' expectations for how bitcoin usually behaves in December. 

On average, bitcoin has tended to rise by around 9.7 per cent in December, ranking it third in terms of performance, with October being the strongest month, with an average gain of 16.6 per cent, and with September, the weakest month, with an average loss of 3.5 per cent. 

Of more relevance might be bitcoin's tight correlation with the stock market at the moment, analysts said. 

"Bitcoin tends to be a leading indicator for overall risk sentiment right now, and its slide does not bode well for stocks at the start of this month," XTB research director Kathleen Brooks said in a note. 

"There is no obvious driver (on Monday). However, the sharp decline in volatility last week, the VIX fell back below the average for the last 12 months, may have unnerved some investors who remain concerned about an uncertain outlook into year-end," she said. 

CME bitcoin futures also show the growing bearishness. 

Bitcoin futures that expire in three months' time are trading at their smallest premium to those that expire this month in at least a year, reflecting how investors are less willing to bank on a sustained rise in the price over time. 

Ether, was down nearly 6 per cent at $2,845, having lost some 22 per cent in value in November, the most since February's 32 per cent slide. 

NEGATIVES STACKING UP 

Jefferies strategist Mohit Kumar said that a number of crypto-negative factors were adding to the pressure on bitcoin on Monday. 

S&P Global downgraded its rating of Tether, the world's largest stablecoin last week, citing an increase in higher-risk assets in its reserves and "persistent gaps in disclosure," which Tether said it "strongly disagrees" with. Meanwhile, Phong Le, chief executive of Strategy, the world's largest corporate owner of bitcoin, told the "What Bitcoin Did" podcast on Friday the company would consider selling its holdings if its "mNAV" metric - the company's enterprise value against the value of its bitcoin holdings - fell below 1. That ratio is currently around 1.19, according to Strategy's website. 

Shares in Strategy and other crypto companies such as Coinbase and miners Riot Platforms and MARA Holdings were down 3-4 per cent in premarket trading. 

Given how much Strategy shares have fallen in the last year, with a slide of 60 per cent compared with a 13 per cent drop in bitcoin in that time, the company could already risk being ejected from benchmark indices, which would exacerbate the pressure on the company's stock and its mNAV metric. Index provider MSCI ends a consultation this month on whether to exclude from its benchmarks those companies whose holdings of digital assets exceed 50 per cent of their total assets. 

Since hitting a record of around $4.3 trillion in size, the crypto market has lost over $1 trillion in value, according to CoinGecko.