A pullback across crypto markets continued on Wednesday, as overall capitalization dropped below $3 trillion for the third time in a month, testing a level that may open the door to further weakness.

Selling pressure was concentrated in large-cap assets, particularly those with active ETF exposure, suggesting a shift in institutional positioning rather than broad retail capitulation.

Bitcoin BTC$86,787.32 slipped 1.5% to $86,580, partly reversing Tuesday's gain. The weakness weighed over the broader crypto market, arresting XRP's (XRP) recovery at around $1.90. Ether ETH$2,936.65 fell back to $2,930 from the overnight high of around $2,980, CoinDesk data show.

These major tokens, which benefited most from early-year institutional inflows, are now leading the downside as sentiment cools.

According to Alex Kuptsikevich, chief market analyst at FxPro, major coins are increasingly "victims of changing institutional sentiment" as investors reassess risk exposure into year-end.

BTC's weak tone contrasted moderate gains in major Asian equity indices like Hang Seng, Shanghai Composite, Kospi, and IDX, which drew strength mostly from expectations of fiscal stimulus from Beijing after a string of weak November economic prints.

Meanwhile, the dollar index has recovered to 98.30 from the 2.5-month low of 97.87 hit Tuesday after U.S. jobs data showed the economy added 64,000 jobs in November – above the 50,000 forecast – while unemployment unexpectedly jumped to 4.6%, its highest since 2021.

A strengthening dollar typically weighs over BTC and other dollar-denominated assets like gold, although as of writing, the yellow metal traded firm above $4,300 per ounce.

Crypto sentiment deteriorates

The market sentiment has deteriorated sharply alongside price action. The crypto fear and greed index has dropped to 11, its lowest reading in precisely one month, firmly inside the fear zone.

Unlike the short-lived pullbacks in February and April, the current decline shows signs of being more than a routine correction, with multiple large-cap assets breaking intermediate technical support levels.

From a technical perspective, the next notable support zone sits near $81,000, where November lows converge with March consolidation levels. A deeper retracement would expose the broader $60,000–$70,000 region, a historically significant zone that previously acted as resistance during the 2021 and 2024 cycles.

Thin liquidity

Liquidity conditions are adding to the pressure. FlowDesk data shows declining market depth as year-end approaches, with leverage remaining subdued as traders close positions and reduce exposure. Lower liquidity has amplified price moves, particularly during U.S. hours, while overall exchange volumes remain historically weak.

On-chain data presents a mixed backdrop. CryptoQuant suggests the recent Bitcoin rally may have exhausted itself, opening the door to a deeper corrective phase before the next sustained advance.

At the same time, Glassnode notes that long-term accumulation continues among corporations and financial firms, expanding beyond miners alone. Strategy's latest purchase of 10,624 BTC – nearly $1 billion – is indicative of selective accumulation persisting even as short-term price momentum weakens.