Bitcoin’s Recent Price Movement: Analyzing the Market Trends
Bitcoin’s (BTC) recent performance has taken a significant downturn, culminating in a bearish trend after a prolonged period of hovering above the $90K mark. This week, BTC experienced a sharp decline of 12.6% in just the first three days (based on UTC hours), marking the most substantial drop since the FTX bankruptcy incident in November 2022, as indicated by data from TradingView.
This sell-off aligns with CoinDesk’s earlier analysis, which highlighted investor dissatisfaction stemming from the Trump administration’s lack of prompt action regarding the establishment of a national BTC reserve, alongside tightening fiat liquidity conditions. As a result, institutional demand for Bitcoin and its second-largest counterpart, Ether (ETH), has weakened, pushing the Chicago Mercantile Exchange (CME) futures market closer to a state of backwardation, where spot prices surpass futures prices. Furthermore, Nasdaq, the tech-heavy index of Wall Street, has faced pressure, further compounding BTC’s challenges.
The Road Ahead: Potential Risks and Investor Sentiment
The pressing question now is, what lies ahead for Bitcoin? The most likely trajectory appears to lean towards the downside, particularly with the impending March 4 deadline for tariffs against Canada and Mexico, which may reignite discussions surrounding Trump tariffs. The initial actions taken earlier this month had already triggered a broad risk-off sentiment across the market.
Bulls Shouldn’t Rely Solely on Upcoming Economic Indicators
Investors who are banking on this Friday’s U.S. ‘core’ Personal Consumption Expenditures (PCE) index—essentially the Federal Reserve’s favored inflation metric—to provide a safety net for risk assets may find themselves disappointed. Noelle Acheson, the author of the “Crypto is Macro Now” newsletter, suggests that while the core PCE is projected to show a year-on-year increase of 2.6% for January, down from December’s 2.8%, the market’s reaction could be more complex.
Typically, a slower inflation rate is seen as a precursor to potential Fed rate cuts, which usually encourages risk-taking. However, this time around, the markets might overlook the anticipated soft reading and focus instead on rising forward-looking inflation indicators. For instance, the Conference Board’s consumer confidence report for February indicated a notable increase in one-year inflation expectations, rising to 6% from 5.2%. This marked jump, coupled with the rising two- and five-year inflation swaps, could influence market sentiment negatively.
Acheson notes that even a softer-than-expected PCE might be interpreted as a sign of economic weakness. “Even if PCE comes in softer than forecast, it could be taken as confirmation of slowing growth, sending markets into another whirlwind of concern,” Acheson remarked in her newsletter shared with CoinDesk. She further elaborated that this prevailing negative sentiment is largely driven by macroeconomic factors, including tariffs, inflated corporate valuations, and portfolio overexposure to AI.
However, there is a glimmer of hope for the crypto market as Acheson believes Bitcoin’s unique dual nature as both a risk asset and a safe haven—akin to digital gold—might attract long-term investors back into the fold. “For most portfolios, the risk-asset/safe haven duality suggests that there is a price at which new longer-term investors will start to come in—this encourages traders to re-enter the market as well,” she explained.
Identifying Support Levels and Demand Zones
According to technical analysis principles, a downward break from an extended range, such as the one Bitcoin has been experiencing, typically results in a notable price drop equivalent to the range’s breadth. Thus, the breakdown from the $90K-$110K range suggests a potential decline towards the $70,000 mark. In a more pessimistic scenario, Bitcoin could tumble into the $72,000–$74,000 region, where a rebound is likely, as noted by Markus Thielen, founder of 10x Research, in a client advisory on Wednesday.
At the time of writing, BTC has bounced back to around $86,000 after testing a proposed demand zone near $82,000. Thielen identified this level using an on-chain metric called the short-term holders’ realized price—the average price at which addresses holding coins for less than 155 days have acquired their BTC. He suggested that historically, Bitcoin rarely trades below this short-term holders’ realized price level during bull markets for extended periods. In bear markets, however, it tends to remain below it for longer stretches. During the summer consolidation in 2024, Bitcoin fell approximately $9,616 below this metric, currently at $92,800. If this pattern recurs, Bitcoin could potentially drop to around $82,000 before stabilizing.
Amidst these fluctuations, some analysts hold onto optimism that regulatory clarity following Wednesday’s Senate Committee hearing on “Exploring a Bipartisan Legislative Framework for Digital Assets” could enhance market valuations. “A clear regulatory framework may be precisely what the market needs for institutions to confidently enter the space, unlocking the next wave of capital inflows. If the U.S. provides definitive guidance on stablecoins and broader digital asset regulations, we could witness substantial institutional allocation into the sector,” stated Matt Mena, a crypto research strategist at 21Shares, in an email correspondence.
