Cryptocurrency prices plummet further, Bitcoin and Ethereum technicals are in trouble! How should the market be positioned moving forward?

Monday (December 15) The crypto market faces another significant correction. According to CoinGlass statistics, over 190,000 traders were liquidated within 24 hours, with total losses reaching $670 million. Market trading depth is severely lacking. Bitcoin has broken below the key level of $86,000, hitting a new low of $85,140 in this decline, nearly 30% off the all-time high of $126,000 set in early October. Ether has also fallen below the $3,000 support level, and the dual-coin correlation-driven downward trend has re-emerged.

Macro Pressure and Market Expectations Double Blow

The Federal Reserve announced a 25 basis point rate cut at the December meeting, lowering the target range to 3.5%–3.75%. Subsequently, on December 1, it officially halted its balance sheet reduction plan and on December 12 launched the Reserve Management Purchase (RMP) plan, purchasing $40 billion in short-term government bonds over the next month. These series of actions should have signaled liquidity easing but failed to provide the expected market boost.

The issue lies in significant internal disagreements within the Fed regarding the pace of future rate cuts. Coupled with challenges to the Fed’s autonomy, long-term bond yields have hit new highs, continuing to suppress risk assets like cryptocurrencies.

On Monday, Fed Vice Chair John Williams sent a relatively dovish signal, suggesting that inflation caused by tariffs might be a one-time shock, while emphasizing that recession risks in the labor market are rising in recent months. This indicates the Fed may focus more on employment data performance.

Subsequently, the market received the November non-farm payroll data, with an estimated increase of only 50,000 jobs and the unemployment rate rising to 4.5%. If the data underperforms expectations, it could support the view that the Fed will maintain an accommodative stance. However, the market has already fully priced in this expectation, making it difficult to generate strong support.

AI Bubble Disruptions and Cryptocurrency Risks Still Unresolved

Market analysis suggests that the current core driver remains skepticism about the profitability of US tech companies, which directly led to a sell-off of tech-mapped assets, including cryptocurrencies.

Bank of America’s global research team’s latest report indicates that its bubble risk indicator shows AI core assets have not yet deviated significantly from fundamentals, but the market is trending toward increasingly bubble-like characteristics, with an almost inevitable risk of bursting. Greg Jensen, Co-Chief Investment Officer of the world’s largest hedge fund Bridgewater, warned that as big tech companies rely more on external financing to cover rising costs, the AI spending boom is entering a dangerous phase.

This concern is especially evident in the credit markets. For example, Oracle’s credit default swap (CDS) trading volume has more than doubled this year, and the cost for investors to buy these derivatives has surged to the highest levels since 2009. This reflects deep market unease about the fundamentals of tech companies. Until the fears surrounding the AI bubble are fully alleviated, the timing window for crypto bottoming out may still need to be delayed.

Technical Warning: Short-term Downside Risks Remain

Bitcoin’s daily chart shows that after encountering resistance around $94,000, the coin has resumed its decline, further breaking below $86,000. The downward trend since early October remains intact, indicating the overall bearish structure is still in place. If Bitcoin cannot effectively hold above $86,000 in the short term, further declines toward $75,000 are likely, with particular attention to the period around January 3.

From a technical perspective, the depth of the breakdown and the repeated low levels suggest that this correction has not yet reached its final stage. Market participants should prepare for further pullbacks and manage risks accordingly.