(MENAFN- Khaleej Times)

Bitcoin's plunge below $85,000 this week has sent a shudder through global cryptocurrency markets, erasing billions in value and reigniting concerns over the sector's fragility.

The world's largest digital asset, which only two months ago traded above $126,000, has now shed nearly one third of its value, dragging major altcoins down with it and triggering a broad risk-off shift among traders from Singapore to New York.

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The selling has been swift and unforgiving. Trading volumes remain elevated, yet liquidity is thinning as investors retreat from leveraged bets.

Ethereum, Solana and BNB have followed Bitcoin's slide, contributing to a market-wide wipeout of roughly $1 trillion since October.

Analysts say that the rout has less to do with crypto-specific panic and more to do with global macroeconomic pressure - higher yields, delayed interest-rate cuts, and worsening growth expectations.

André Dragosch, head of research at Bitwise Asset Management in Europe, captured the mood bluntly:“Bitcoin is currently pricing in the most bearish global growth outlook since the 2022 FTX crisis or the Covid shock.” His assessment aligns with a surge in risk aversion as investors increasingly treat crypto like any other volatile asset class tied to the health of the broader economy.

Evidence of stress is piling up. More than $600 million in leveraged crypto positions were liquidated within days, a wave of forced selling that deepened losses and intensified volatility. Corporate exposure is being reshaped, too. Strategy, once the world's largest listed corporate holder of Bitcoin, slashed its 2025 earnings forecast, citing the price collapse and weaker digital-asset revenues - a reminder that crypto's swings now reverberate across traditional balance sheets.

Some short-term support exists, though it is fragile. Bitcoin's fall below $87,000, analysts at Delta Exchange noted, points to continued bearish momentum, with the next technical test around the $82,000 level. Yet several quantitative traders argue that the latest wash-out may be clearing excess leverage, potentially setting the stage for a relief bounce. A Mudrex analyst said that if markets stabilise,“Bitcoin could rebound into the $90,000 to $92,400 range,” though such optimism hinges on calmer global conditions.

Major tokens outside Bitcoin are offering little comfort. Ethereum's decline of more than 7 per cent in one session reflects a growing correlation between cryptocurrencies and equity markets, eroding the notion of crypto as a hedge or uncorrelated asset. As one Singapore-based portfolio manager put it,“crypto now trades like a high-beta tech stock - but without the earnings.”

Still, some historical context helps temper the shock. December is traditionally a weak month for Bitcoin, with median returns over 12 years showing a typical decline of about 3.2 per cent. What is unusual this year is the scale of the drop and the macroeconomic cloud looming over it.

Looking ahead, the 2026 outlook carries both risk and opportunity. Most major research desks do not expect a return to the euphoric peaks of 2025 anytime soon, but neither do they foresee a structural collapse. Much depends on interest-rate trajectories. If central banks shift toward cuts in mid-2026, analysts believe risk assets - including cryptocurrency - could stabilise and possibly regain momentum.

Forecasts vary. Conservative projections from institutional-grade research desks place Bitcoin in a $70,000 to $110,000 range for 2026, assuming modest recovery in global growth and reduced volatility. A more optimistic scenario, led by analysts who emphasise Bitcoin's fixed 21-million supply and rising institutional adoption, puts the upper range at $140,000, provided market conditions turn decisively accommodative.

Ethereum's 2026 forecasts run from $3,200 on the low end to $5,800 on the high end, contingent on network upgrades, ETF inflows and broader market sentiment. Key catalysts for both Bitcoin and Ethereum include the pace of real-world ETF adoption, interest-rate cycles, regulatory clarity in the US, and the potential expansion of tokenised assets - a sector that many traditional financial institutions plan to deepen next year.

Analysts argue that while the focus remains on navigating the storm, investors face an unforgiving mix of macroeconomic pressure, thinning liquidity and jittery sentiment. Whether Bitcoin stabilises above $80,000 or sinks toward the low-$70,000s will likely be determined less by crypto fundamentals and more by global economic winds.

They insist that the cryptocurrency market has entered a period of heightened uncertainty. Whether this is a prolonged winter or the early phase of a reset that sets the stage for 2026's recovery remains the question shaping every investor's next move.

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