Bitcoin's $90K Dream Doesn't Last: How Market Momentum Fades and Reverses

The Brief Rally That Turned Into a Sharp Reversal

Bitcoin’s momentary breakthrough to $90,000 on Wednesday morning sparked hopes of a sustained rally, but the enthusiasm quickly evaporated. The largest cryptocurrency tumbled to nearly $85,000 as market participants watched their optimism reverse, settling around $85,921 according to CoinGecko—a decline of 2% over the past day. This sharp reversal showcased how fragile current market sentiment remains.

Prediction Markets Signal Growing Skepticism

The loss of confidence is clearly visible on Myriad, a prediction market platform, where traders have dramatically reduced their bullish bets. Just 24 hours earlier, market participants assigned a 69% probability to Bitcoin reaching $100,000 before falling to $69,000. Today, that conviction has eroded to just 57%, revealing a significant fade in trader confidence. Even more telling, the odds of experiencing a traditional Santa rally have collapsed to below 4%, indicating that the year-end bounce many expected is no longer in the cards.

The Liquidation Cascade and Derivative Pain

The volatility took a toll on leveraged traders. Over the past 24 hours, $155 million in Bitcoin derivatives contracts were liquidated as prices dipped as low as $85,373, according to blockchain analytics firm CoinGlass. This liquidation cascade reflects how quickly positions unwound as the bounce failed to sustain.

Ethereum followed Bitcoin’s lead, initially rising above $3,000 before collapsing 4% to $2,824 on the day. The second-largest crypto is now down 16% over the past week, worse than most top-10 assets by market capitalization.

ETF Outflows Accelerate the Decline

The momentum reversal in spot Bitcoin ETFs has been particularly telling. Week-to-date, Bitcoin ETF funds have already experienced $634 million in net outflows, according to Farside Investors. This consistent drain of capital suggests institutional investors may be rotating away from crypto exposure.

Multiple Headwinds Colliding

Several factors are converging to undermine market confidence. The U.S. jobs report released yesterday showed unemployment climbing to its highest level since 2021, sending shockwaves through risk assets globally. But the bigger concern looming for traders is the Bank of Japan’s expected rate decision on Friday.

If the BoJ follows through with a rate hike—something market participants are actively bracing for—it could reverse the lucrative yen carry trade that has historically anchored global liquidity flows. When carry trades unwind, risk-on assets like Bitcoin typically experience sharp selloffs as traders reposition.

Matt Hougan, Chief Investment Officer at Bitwise, offered some perspective to market participants, acknowledging that while a rate hike is largely priced in and shouldn’t create dramatic volatility on its own, “it’s a scary headline—Japanese interest rates at a 30-year high! In the current market environment, you could see short-term downward pressure as investors react to that headline.”

What Comes Next

The sharp reversal from $90,000 to $85,000 encapsulates the fragile state of current crypto markets. With prediction market odds deteriorating rapidly, institutional ETF money flowing out, and macro headwinds gathering, the Santa rally narrative has effectively faded. Whether Bitcoin can stabilize above $85,000 or faces further downside will likely depend on how markets react to Friday’s Bank of Japan decision and what happens with the yen carry trade unwind.