Bitcoin’s Recent Dive: What’s Behind the Fall?
Bitcoin has recently plunged below the $80,000 mark, currently trading at approximately $77,800, signifying a staggering 14% drop just within the past week. Ethereum, too, has felt the sting of this downturn, with its price dropping to $1,860, a level not seen since November 2023. As the cryptocurrency landscape deals with this sudden change, the atmosphere is increasingly tinged with uncertainty, reminiscent of the bear market that engulfed investors in 2022.
Extreme Fear is Driving Bitcoin Liquidations
Market sentiment has taken a significant hit, as evidenced by the Crypto Fear & Greed Index, which has plummeted to a mere 17— a far cry from the over 92 levels seen during last year’s bullish run. This drastic shift indicates a broad market correction, driven primarily by substantial capital outflows from digital assets. Recent reports highlight that in just the last four hours, total liquidations exceeded $195 million, with approximately $161 million of that attributed to long positions. This sell-off suggests many traders were caught unaware, resulting in forced liquidations that only exacerbated Bitcoin’s market decline.
Crypto Fear and Greed Index. Source: Alternative
Institutional Investors Cut Exposure
The current crypto market also showcases a critical trend among institutional investors, who have been offloading their digital assets for over a month. For instance, during the week ending March 7, there were outflows amounting to $876 million from digital asset investment products, bringing the total outflows over the past four weeks to approximately $4.75 billion. Specifically, Bitcoin has faced a $756 million loss from these withdrawals.
As a result, total assets under management across digital funds have dropped significantly, losing $39 billion from their previously recorded peak. The current assets are resting at about $142 billion—the lowest level since mid-November 2024—signifying a stark shift in the market landscape.
Weekly Crypto Asset Flows. Source: CoinShares
Impact of Policy Changes on the Market
The recent trading landscape has been further complicated by external policy movements, notably President Trump’s new tariffs on several major trading partners. These actions have increased selling pressure, prompting many institutional investors to withdraw from risk-laden assets like cryptocurrencies. Following the White House Crypto Summit, Trump’s discussions surrounding the creation of a U.S. Bitcoin Reserve—using seized BTC—have added a layer of volatility, dampening market confidence and triggering additional sell-offs.
“The moves in crypto and stocks are becoming increasingly one-sided. Red days are DEEP red days and vice-versa, yet another sign of changing risk appetite. Sentiment is the ultimate driver of price,” the Kobeissi Letter remarked.
What’s Next for Bitcoin?
As Bitcoin trades under this pressure, market experts are diverging in their predictions for what’s next. Arthur Hayes, former CEO of BitMEX, anticipates that Bitcoin may dip further to around $70,000 before the market possibly turns bullish again. He notes:
“An ugly start to the week. Looks like BTC will retest $78,000. If it fails, $75,000 is next in the crosshairs. There are a lot of options OI struck between $70,000 to $75,000. If we get into that range it will be violent.”
Conversely, MicroStrategy has revealed plans to raise up to $21 billion through an issuance of Series A Perpetual Preferred Stock, which could signify potential acquisitions of more Bitcoin in the future.
Interestingly, some analysts suggest that Bitcoin’s price may correlate with liquidity trends, particularly as the M2 money supply—encompassing cash, checking deposits, and easily convertible near-money assets—has shown signs of recovery after bottoming out. This could present a future opportunity for Bitcoin’s rise, as per the analysts at Crypto Stream:
“Some argue that liquidity—measured through M2 money supply—is the real driver of Bitcoin’s price. M2 money supply bottomed and has been recovering sharply. If this holds true, we should see Bitcoin start grinding higher in the coming weeks.”
However, doubt lingers among skeptics who caution that not all liquidity inflows equate to growth in the cryptocurrency sector.
As Bitcoin and other cryptocurrencies continue to navigate this tumultuous period, clarity of direction remains uncertain, leaving investors and enthusiasts alike on the edge of their seats—wondering whether this is merely a dip or the beginning of a deeper decline in the ever-volatile world of digital assets.