4 min readBitcoin has recovered to 103k at the time of writing, but remains down 7.5% over the past 7 days. The price briefly fell below 100k for the first time since June, trading 20% below its recent record high, entering bear market territory.
The drop was more severe in other cryptos, with ETH, the second-largest cryptocurrency, trading 13% lower over the past 7 days, while Solana has plunged 18%.
A more challenging macro environment has weighed on Bitcoin after the market reined in December Fed rate-cut expectations following a more hawkish stance by Fed Chair Powell last week. This, combined with weak institutional demand— BTC ETFs have recorded five straight days of outflows—and long-term holders selling—LTHs sold over 400k BTC last month — is pressuring BTC’s price.
The sell-off intensified yesterday, with BTC plunging almost 5% amid a sharp selloff in AI-related stocks driven by overvaluation fears, sparking a broader risk-off move across markets.
Sentiment analysis showed the Fear and Greed index dropped to 23 (Extreme Fear), down from 51 (Neutral) last week. Sentiment of Extreme Fear can signal that investors are overly worried, creating a buying opportunity.
Dip buyers have since emerged at the key psychological and technical level, lifting BTC to 104k at the time of writing. This bounce has been seen across the crypto sector and US equities.
Watch this key technical level:
While BTC trades 20% below its recent record high, it is entering bear market territory. On the charts, the 50-week SMA is often considered a key support level, below which a bear market begins. The 50 SMA has guided the price higher over the almost 3-year bull market. For now, buyers have successfully defended the 50-week SMA.
For BTC to see a meaningful reversal of recent losses, the US government shutdown may need to end. While the shutdown is ongoing, liquidity remains scarce. The Treasury General Account is around $150 billion above its $850 billion target, which means that money isn’t flowing into the economy, depriving risk assets of capital. Bitcoin is particularly sensitive to liquidity conditions.
This is a temporary liquidity squeeze that is expected to resolve when the US government shutdown ends. Therefore, when the US government reopens, BTC could pump higher. However, should the shutdown persist, BTC could fall further.
Trading involves risk.
Author
Risk DisclaimerThe content provided here is for informational purposes only. It is not intended as personal investment advice and does not constitute a solicitation or invitation to engage in any financial transactions, investments, or related activities. Past performance is not a reliable indicator of future results.
The financial products offered by the Company are complex and come with a high risk of losing money rapidly due to leverage. These products may not be suitable for all investors. Before engaging, you should consider whether you understand how these leveraged products work and whether you can afford the high risk of losing your money.
The Company does not accept clients from the Restricted Jurisdictions as indicated in our website/ T&C. Some services or products may not be available in your jurisdiction.
The applicable legal entity and its respective products and services depend on the client’s country of residence and the entity with which the client has established a contractual relationship during registration.
