Bitcoin drops below $82,000: 10 things you must know
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Bitcoin drops below $82,000: 10 things you must know
Don't try to look for enemies within the system; instead, strive to find patterns within the system.
Navigating Web3 tides with focused insights01 The Crash: Bitcoin's "Black Friday"
For Bitcoin, last Friday was truly a "Black Friday."
On November 21, Bitcoin broke below the $82,000 mark and briefly approached the $80,000 level. Compared to its all-time high of $126,000 just set on October 6, it had lost a full 35%. Within 24 hours, the total liquidation across the entire network exceeded a staggering $1 billion. Hundreds of thousands of traders were wiped out in this crash.
Goodness. One billion dollars.
While price fluctuations are normal for Bitcoin, why was this drop so fierce and sudden?
Let me try to walk you through it.
It starts with the immediate cause of the crash:
Professional institutions massively sold off their Bitcoin ETFs.
02 Bitcoin ETF: A "Pork Ticket" for Bitcoin
What is a "Bitcoin ETF"?
Say you want to invest in pork because you believe pork prices will rise.
In the past, you'd have to raise pigs yourself—time-consuming, labor-intensive, and risky. But now, a trust company appears. It buys one million pigs and places them in a professional pigpen. Then, it divides ownership of these pigs into 100 million "pork tickets," listing them on a stock exchange. Now, you can simply open your brokerage account and trade these "pork tickets" like stocks. Or call them "Pork ETFs."
Exactly. This "pork ticket" is an ETF—short for Exchange-Traded Fund, or tradable open-ended index fund.
Likewise, a Bitcoin ETF is a "Bitcoin ticket"—allowing you to gain exposure to Bitcoin’s price movements without actually holding real Bitcoin.
In January 2024, U.S. regulators officially approved it. Why? There were many reasons. But the direct catalyst was that regulators lost a key legal battle against a crypto firm. At the same time, Wall Street giant BlackRock led the application push. Ultimately, regulators had no choice but to open the floodgates.
From then on, not only gold and oil, but Bitcoin too, gained ETFs.
Although ETFs don't change Bitcoin’s nature, they completely transformed how capital flows in and out.
On one hand, it became a "super ramp-up channel," enabling vast amounts of capital to flow in easily. On the other, it became a "super exit channel," allowing capital to withdraw from the market at unprecedented speed.
So why did institutions suddenly sell off Bitcoin ETFs en masse and exit so abruptly?
Because they reacted to a series of "hawkish statements" from the Federal Reserve.
03 Hawkish Statements: Forget It, No Rate Cuts
What are these hawkish statements?
Take a recent example.
On November 20, 2025—the day before the crash—Federal Reserve Chair Powell delivered a speech. Let’s look at his exact words.
While we acknowledge some progress has been made, inflation remains stubbornly above our 2% target. Declaring victory now or speculating about the timing of rate cuts would be extremely premature. We are fully prepared to maintain our restrictive policy stance—that is, keeping interest rates “higher for longer”—until we are confident that the fight against inflation is truly over.
This statement contains critical information: inflation remains sticky; guessing about rate cuts now is highly immature; interest rates will stay “higher for longer.”
In plain terms: “Don’t dream—it’s worse than you think”; “Your expectations of a December rate cut are completely wrong and wishful thinking—I’m officially rejecting them”; “High interest rates will be the new normal, not temporary. The party is over.”
But if we boil it down to one core message, it’s simply this:
“I can tell you right now—we won’t cut rates.”
But what does “no rate cuts” have to do with institutional selling?
Because Powell’s statement signaled to the market that newly issued U.S. Treasury bonds (“new debt”) would carry higher interest rates.
04 New Debt Yield: The "Official Price" of Money
Why? Why does “no rate cuts” lead to higher yields on new debt?
Think of financial markets as a “supermarket for money.”
The Federal Reserve is the store manager. It operates a special counter called the “risk-free official savings counter.” Not cutting rates means the manager is using a megaphone to announce: “My official counter will continue offering 5.5% annual interest—zero risk.”
This 5.5% becomes the “official reference price” for the entire money supermarket.
Now, the U.S. government, acting as a vendor, needs to issue new IOUs—new Treasuries—to borrow money from customers. Can it offer only 3% interest? No. Customers would think, “Am I crazy? Why wouldn’t I just deposit my money at the manager’s 5.5% counter?”
Exactly. The effect of this reference price is that any bond offering a lower yield (i.e., “cheaper” borrowing cost) becomes unsellable.
Therefore, to actually raise funds, the U.S. government must set the yield on new debt close to—or even higher than—the Fed’s official rate. Say, 6%.
This is the causal link between “no rate cuts” and “higher new debt yields.”
But these new bonds haven’t even been issued yet. Why are institutions selling now?
Because everyone knows that once this “expectation” forms, asset prices will start plunging.
05 Expectations: Markets Adjust Yields Through Falling Prices
Why?
Because no one is stupid. When higher-yielding assets are expected to appear and existing interest payments can’t be changed, lower-yielding assets adjust by lowering their prices to increase effective yields.
Imagine you bought a house for $200,000 that generates $10,000 in annual rent—a 5% rental yield. If rent is fixed, dropping the price to $100,000 doubles the yield to 10%, potentially attracting buyers.
Similarly, when markets expect new bonds yielding 6%, investors begin selling old bonds yielding only 3%. As old bonds are dumped, their prices fall.
How far? The details are complex. But overall, old bond prices keep falling until their yields rise to match the expected returns of new bonds—restoring market equilibrium.
That’s why selling happens now—while prices are still relatively high.
And it’s not just old bonds being sold. High-Beta assets like Bitcoin are especially vulnerable and get dumped first.
06 High-Beta Assets: "Temperamental" Assets Everyone Rushes to Dump
What are “high-Beta assets”?
Beta can be seen as a measure of an asset’s “temperamental volatility.”
If the overall market’s Beta is 1—like an ordinary family sedan—then high-Beta assets are Formula 1 race cars. In good weather (Risk-On), many people enjoy driving fast—they may deliver outsized returns. But in bad weather (Risk-Off), most switch to safety mode, selling off unstable race cars and switching back to reliable sedans.
Bitcoin is a classic high-Beta asset. Hence, it gets dumped early—and massively. Data shows that in the weeks leading up to November 21, U.S. spot Bitcoin ETFs experienced five consecutive weeks of net outflows, totaling $2.6 billion in sales.
Fine. So institutions sold these assets for safety. But why did this trigger a collapse wiping out hundreds of thousands?
Because institutional actions sparked a panic-driven stampede.
07 Panic Stampede: Boulder Rolls, Crowd Flees, Chain Reaction Explodes
What is a “panic stampede”?
First, the boulder rolls.
Institutional selling—even if rational—acts like pushing a massive boulder from the mountaintop. Market balance breaks. Prices begin their first wave of decline.
Next, the crowd flees.
Thousands of retail investors, seeing the rolling boulder, become fear-driven and start selling too. If big institutions are fleeing, they think, I’d better get out now. Selling spreads, accelerating the price drop.
Finally, chain reaction explosions.
Rapid price declines trigger margin trading “liquidations”—that is, blow-ups. Then, a downward spiral begins: falling prices trigger more liquidations, which further depress prices, triggering even more liquidations…
In investing, fear runs faster than greed. And computer programs run faster than fear.
So why did Bitcoin crash?
Because the Fed’s hawkish signals made new Treasuries highly attractive. To seek safety, institutions prioritized selling risky Bitcoin while also dumping old bonds. Mass selling of Bitcoin ultimately triggered market panic and collapse.
Yes. At its core, this is about “shearing the U.S. government’s wool.”
08 Shearing the U.S. Government’s Wool: Capital Has No Faith, Only Flow
What does “shearing the U.S. government’s wool” mean?
Let me tell you a story.
To fix city traffic (fight inflation), the police chief (the Fed) orders the downtown bank (U.S. government) to leave its vault unlocked 24/7—anyone can walk in and take money.
The bank manager is unhappy—but complies.
Xiao Wang, who was driving a modified race car (Bitcoin) toward adventure, hears the news and immediately sells his car to collect the risk-free cash from the bank—an option encouraged by the police chief.
This is “wool shearing.”
Specifically: sell high-risk assets like Bitcoin, use the proceeds to buy low-risk U.S. Treasury bonds paying decent interest—funded ultimately by taxpayers gritting their teeth.
Capital has no faith—only direction.
Bitcoin’s collapse proves this truth once again.
But isn’t this absurd? Why would the Fed oppose the U.S. government?
Because they each have distinct duties.
09 Accelerator and Brake: Keeping the Vintage Car From Falling Apart
The U.S. government and the Fed are like the “accelerator” and “brake” in a car.
The U.S. government (Treasury) is the accelerator. Its job is to spend, borrow, and stimulate the economy. Thus, it wants borrowing costs as low as possible.
The Fed is the brake. Its mission is price stability (controlling inflation) and maximum employment. To prevent engine overheating (inflation) from excessive speed, it sometimes hits the brakes (raises or maintains high rates)—even though this often frustrates the foot on the accelerator.
This institutional design—removing the brake from politicians’ hands—is called “central bank independence.” Its purpose is to avoid a greater disaster: hyperinflation. History is filled with governments that, after seizing control of the printing press, printed recklessly and collapsed their economies.
So while they seem to oppose each other, their ultimate goal is the same: ensuring America’s 200-year-old vintage car doesn’t fall apart.
10 Complex Systems: Never Anthropomorphize the System
Back to Bitcoin.
Will Bitcoin keep falling, or will it rebound?
Hard to say.
But perhaps the key lesson so far is: “Never anthropomorphize the system.”
Some claim this crash was a conspiracy by manipulators, or evil actors at work.
I don’t know if that’s true. But I prefer to believe it’s the result of countless individuals—like the Fed, the U.S. government, institutions, and retail investors—making choices they believed were optimal under their own rules and incentives. These decisions, combined, created the situation we see today.
So don’t look for enemies within the system—look for patterns.
Only then can you achieve clearer insight than others.
Perhaps even see which way the tide is flowing.
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