“When you combine a hawkish Fed with that level of supply shock, the floor naturally falls out. This is the market aggressively repricing risk.”

Several other analysts also highlighted sentiment, along with market leverage and macro factors, as contributing to the digital asset dropping to its latest multimonth low.

Joe DiPasquale, CEO of cryptocurrency hedge fund manager BitBull Capital, highlighted developments like these, stating via email that “The latest decline is a mix of risk-off sentiment, ETF outflows, and leveraged positions getting unwound.”

“Broader markets have pulled back, liquidity has been thin, and each wave of selling has triggered more forced liquidations, creating a mechanically driven slide rather than a single catalyst,” he stated.

Katherine Dowling, advisor at Bitwise Asset Management, also highlighted multiple variables when explaining bitcoin’s latest drop.

“A likely blend of factors has put bitcoin into this seeming spin cycle including fed rate sentiment, labor market, general tech ‘risk off’ mood fostered by frothy AI multiples and a dash of margin calls to boot,” she stated via email. “The government shutdown back drop has also not helped.”

However, Dowling also offered some input that might help manage expectations, stating that “It is important to keep in mind that pull backs of this magnitude are on brand for bitcoin and better to focus on the long term hold fundamentals.”

Matt Williams, head of financial services at Luxor, focused on the impact of falling liquidity and high leverage when detailing bitcoin’s latest decline.

“Liquidity continues to dry up due to bearish sentiment, which is exacerbated heading into the holiday week when liquidity historically shrinks anyway,” he stated via email.

“There are more forced liquidations amongst participants that took on long positions around $90k,” said Williams. “There are also rumors of large crypto market makers being forced to liquidate sizable long BTC derivatives positions, but these rumors have not been substantiated yet.”

David Brickell, head of international distribution for FRNT, described the factors that drove the latest losses as a “continuation” of variables that caused declines in recent weeks.

“Tech remains under pressure — even NVIDIA’s stronger-than-expected results weren’t enough to offset growing concerns about stretched valuations. At the same time, liquidity in US funding markets remains tight,” he stated via Telegram.

“Key funding rates are still elevated, even as the TGA begins to draw down, which is limiting the usual relief that would follow a fiscal liquidity injection,” Brickell added, referring to the Federal Reserve’s Treasury General Account .

“Meanwhile, we’ve broken through several major technical levels, triggering systematic and momentum strategies to sell into weakness,” he noted.

“The combination of tighter liquidity, systematic selling, and a lack of any compelling new bullish narrative is leaving markets without a natural bid,” said Brickell.