Analysts Cite China and Derivatives Pressure in Crypto Sell-Off
The total cryptocurrency market capitalization fell sharply following a $140 billion exodus from digital assets over recent hours. The metric reached a three-week low of $3.02 trillion late Monday, with Bitcoin leading the decline during what analysts had anticipated to be a volatile week. BTC lost support at $90,000, dropping almost $5,000 in a few hours to $85,200—its lowest since the massive leverage flush on December 2. By Tuesday morning in Asian trading, Bitcoin hovered just below $86,000.
Analyst Perspectives on the Drop
Analyst NoLimit attributed the sell-off to China, stating that the country “tightened regulations on domestic Bitcoin mining again,” forcing miners offline. The analyst also predicted that the Bank of Japan could further impact Bitcoin this week.
Meanwhile, analyst Sykodelic pointed to derivatives markets, emphasizing high open interest (OI) as a key factor. They noted, “Basically, it is becoming extremely accepted to be bearish with everyone really feeling the pinch of the downtrending market. Its creating the environment where traders are chasing every drop with shorts, and short liquidity building up over and over.”
Deribit data shows $2 billion in OI at the $85,000 strike price, suggesting that short sellers could amplify downward pressure by selling spot or futures as prices approach their strike levels. Analyst James Check remarked that “Bitcoin market stress is now the highest we’ve seen since the 2022 bear,” citing around $100 billion in unrealized losses, falling hash rates, 60% of ETF inflows underwater, and treasury stocks trading below net asset value.
U.S. Legislative Delay
The primary factor behind the recent sell-off may be the delay in U.S. crypto market structure legislation. A spokesperson from the Senate Banking Committee confirmed that no market structure markup will occur this year, postponing key bipartisan legislation until Congress reconvenes in early 2026.
“The Committee is continuing to negotiate and looks forward to a markup in early 2026,” they stated. The crypto industry had anticipated this legislation, which would grant the CFTC authority over spot markets, to progress before the end of 2025.
Overall, market analysts highlight a combination of regulatory delays, derivatives pressure, and ongoing volatility as driving the crypto market below $3 trillion in capitalization.
