Why is Bitcoin Crashing Today : Roughly $1 Billion Wiped Out

The crypto market saw a huge wipeout as part of the recent crash in Bitcoin’s price. Nearly a billion US dollars worth of leveraged assets were wiped out as Bitcoin took a plunge. 

From liquidation data that was sourced from various entities, it has become clear that a total of 2 billion US dollars were forcibly liquidated in a 24-hour timeframe. This had given clear implications about the devastating effect the crash had on the market.

As of December 1, 2025, Bitcoin plummeted below $86,000. During the duration of this crash, Bitcoin was trading between $85,800 and $86,000. Intraday traders lost over 5% in a single day; this crash marked the steepest loss in a single day in December 2025. 

Both investors and analysts were dumbstruck at the tumble, asking themselves why Bitcoin was plummeting so deeply again. In this article, we will look at the answers to these questions by addressing the factors, which are a mix of macroeconomic pressure, leveraged liquidations, institutional outflows, and a fading market confidence.

Macro Pressure From Shifting Rate Expectations

The data that could be sourced from analysts and industry experts revealed that macroeconomic uncertainty had a major role to play in the crash. On a global scale, financial markets are becoming increasingly worried about the shifts in interest rates.

A large portion of 2025 was optimistic that the Federal Reserve would soon cut rates. The Federal Reserve’s interest rate cut is a major confidence source for risk assets like Bitcoin and crypto assets; however, this confidence faded away as the Fed’s communications became hawkish and the economic data supported their communication.

The delay in processing the rate cuts, or the potential news that says there will not be rate cuts, has caused a shift in investor sentiment. With the rate cuts under threat, investors, especially institutional, are migrating to more stable assets. This is problematic and risky for crypto and equities alike.

In 2025, Bitcoin’s price was heavily affected as the market’s tone shifted against speculative bets on Bitcoin. November was an extremely volatile month for Bitcoin as it saw extreme price swings that ranged nearly 30% from the October high. This year, it became certain that the November high had vanished completely, and Bitcoin is in for further shocks from the market, as investor confidence has been drained.

Forced Liquidation and Thin Liquidity

Forced liquidations and a subsequent liquidity crunch had much to do with Bitcoin’s recent downfall. The major support levels at $100,000 and $90,000 were breached easily, and many leveraged LONG positions on the futures market were subjected to forced liquidations. These margin calls led to more sell orders that pushed the prices lower again, creating what was essentially a downward feedback loop.

The market became more fragile as market makers and institutional liquidity providers pulled out of the market after witnessing the crash. This created a thin liquidity layer that destabilized the asset, and volatility consequently shot upwards, pulling prices down with it. 

One of the industry’s leading analysts, Tom Lee, suggested that the auto-deleveraging systems, too, had a role to play in the crash. He refers to this as a mechanical glitch that could have stemmed from these auto-deleveraging mechanisms putting sell-offs after being notified of the rising volatility of the market. After this alarming sell-off began, the order book was drained immediately, leading to a liquidity thinning, which further affected the stability of the Bitcoin market.

All of this brings out some interesting facts. Even the modest sell-offs were considered as a driving factor to the crash, as they too were helping in amplifying the wipeout.

Institutional Outflow and Profit Taking Triggers Low Confidence In Investors

There were factors beyond the macroeconomics and structural market issues that plagued Bitcoin. The market psychology and institutional outflows critically impacted the asset’s performance on the market. In late November, many institutional investors and large-scale capital providers had decided to reduce their risk exposure. This led to a massive outflow of institutional capital from Bitcoin ETFs.

Coupled with the outflow came a market sentiment that was heavily influenced by the idea of profit taking and loss cutting. Investors pulled out of the market and left the HODL ideology all of a sudden.

The long-term investors played a key role in the crash as they made rampant sell-offs that created a widespread profit-taking spree. According to data from on-chain analysis, this level of sell-off was not reported in a year’s time since 2024.

The institutional outflow triggered a negative sentiment that forced many traders to close their positions in the search for reducing risk exposure. In short, the institutional inflow, which once fueled the rally, was now reversed and was pulling the price down from the October highs.

Conclusion

It is not because of isolated factors that Bitcoin is crashing; rather, multiple factors work in tandem to build selling pressure in the market and undermine investor confidence. Macroeconomic headwinds, forced liquidations, institutional outflow, thin liquidity, and investor confidence all played a part in their due time in bringing down Bitcoin’s price and stalling the rally that everyone was expecting from Bitcoin.

In the short term, this makes the market fragile and vulnerable to further drawdowns. There are, however, investors who see this fall as the right opportunity for making a market entry, as they view the recent crash as a market correction and not an outright bear run for the long term. That said, the risk remains high for now, especially for short-term investors. Continued regulatory bottlenecks, volatility, and institutional behavior will continue to dominate Bitcoin’s price action.

Also Read: MicroStrategy’s Bitcoin Holdings Hit 650,000 as It Sets $1.44B Reserve for Payouts