Global financial markets are facing a broad-based selloff this week as appetite for risk assets, including crypto and stocks, begins to wane.

Bitcoin plunged below the historic $100,000 level on Tuesday, while the S&P 500 index and gold fell 3% and 10% from their respective peaks. On Wednesday, Bitcoin dropped to an intraday low of $99,110 before recovering slightly, marking a 21% decline from its October peak, CoinGecko data shows. 

The broader crypto market capitalization fell to $3.44 trillion, its lowest level in four months. The sell-off also triggered over $2 billion in liquidations across digital assets, the second consecutive day of a major unwind in leverage.

Regardless of the key catalysts driving the selloff or how good the network fundamentals look, the critical question for investors is how much further prices could decline from here. 

Ryan Yoon, Senior Research Analyst at Tiger Research, expects Bitcoin to hold $98,000 and maintains his long-term $200,000 price target.

The downturn reflects a fundamental shift in market dynamics, specifically risk aversion,  Tim Sun, Senior Researcher at HashKey Group, told Decrypt. 

“Bonds were the only asset class to post meaningful gains, while most risk assets—including Bitcoin, gold, and equities—saw broad-based pullbacks,” he said. “Even if downside pressure persists, the $85,000 level remains a strong area of support for Bitcoin.”

 “USD strength may be one of the main driving forces behind the market-wide fall in price,” Jiehan Chen, Operations Onboarding Lead Analyst at Schroders, told Decrypt.

Other experts echoed that a strengthening U.S. dollar is a key pressure point for dollar-denominated risk assets.

Sun also pointed to concerning signals in short-term funding markets, including widening spreads and increased usage of the Fed’s Standing Repo Facility, alongside a U.S. Treasury account that has surpassed $1 trillion, effectively draining liquidity from the system.

The tightening liquidity environment has amplified fears and uncertainty due to the ongoing U.S. government shutdown, which is likely to extend through December. 

On prediction market Myriad, owned by Decrypt’s parent company Dastan, users placed a 98.7% chance that the ongoing government shutdown will be the largest in U.S. history.

While the government shutdown is sparking fear, Derek Lim, Head of Research at Caladan, told Decrypt that tightening liquidity is amplifying the ongoing selloff.

While sentiment has turned sharply negative, on-chain data reveals a more nuanced picture. 

“Bitcoin’s recent dip below $100K is primarily sentiment-driven,” with the Fear & Greed Index plunging to 21, according to verified CryptoQuant analyst XWIN Research.

The post highlights that key network fundamentals remain strong, with hash rates near all-time highs and $10.7 billion in stablecoins flowing into Binance, potentially serving as dry powder for future purchases.

Despite Bitcoin’s drop below $100,000, “social data indicates there are still many buying dips with confidence,”on-chain analytics platform Santiment noted in a Wednesday tweet, echoing XWIN Research’s take.