Bitcoin plunged below $86,000 on Monday as cryptocurrency markets lost $140 billion in total capitalization in a matter of hours, mainly due to delays in key US regulatory legislation. The selloff pushed the total market capitalization of digital assets to a three-week low of $3.02 trillion.
What Happened: A Legislative Setback
A US Senate Banking Committee The spokesperson confirmed Monday that planned crypto market structure legislation would not move forward this year, pushing the bipartisan bill back to early 2026.
“The Committee continues to negotiate and looks forward to an increase in early 2026,” the spokesperson said.
The proposed legislation would grant Commodity Futures Trading Commission authority over cryptocurrency spot markets, a development the industry had anticipated before the end of the year.
Bitcoin fell from $90,000 to $85,200 during Monday’s late trading session, marking its lowest level since the December 2 leverage liquidation. The asset traded near $86,000 during Tuesday’s Asian session.
Read also: UK regulator sets February deadline for industry input into digital assets framework
Why it matters: Market stress
James Checka cryptocurrency analyst, noted that “Bitcoin market stress is now the highest we have seen since the 2022 decline.” He cited $100 billion in unrealized losses, falling hash rates, 60% of exchange-traded fund inflows trading underwater and treasury shares below net asset value.
Analyst Sykodelic attributed this decline to derivatives market dynamics, particularly high open interest levels.
“Basically, it’s becoming more and more accepted to be bearish, with everyone actually feeling the effects of the market’s downtrend,” Sykodelic said. “This creates an environment where traders chase every dip with shorts and short liquidity piling up over and over again.”
At press time, $2 billion in open interest sits at the $85,000 strike price.
Short sellers typically hedge by selling spot or futures contracts when prices approach their strike levels, thereby amplifying downward momentum.
Read next: Bitcoin Could Reach $600,000 in 2026 If Fed Policy Changes, Analysts Project
