Bitcoin has experienced a significant drop of 24% from its all-time high. Analysts suggest BTC is “very close to its local bottom,” however, the possibility of unforeseen events could trigger an even steeper decline.
Macro Turmoil Impacts Bitcoin
Bitcoin’s (BTC) price fluctuations have been notable. After reaching an all-time high of $109,114 in January, the cryptocurrency’s value has taken a downward turn.
As of March 13, Bitcoin’s price is approximately $82,600, a 24% decrease from January’s peak, following a plunge to a four-month low of $76,600 on March 11.
The market faces challenges from various fronts. Increased risk aversion on Wall Street, escalating U.S. recession fears, and new tariff policies have created additional uncertainty.
Many investors expressed disappointment over the absence of additional BTC purchases, which some anticipated would provide constant demand under the current administration’s strategic reserve initiative.
Recent inflation data released on March 12 provided a fleeting sense of optimism. February’s consumer price index saw a modest rise of just 0.2%, leading to an annual inflation rate of 2.8%, down from 0.5% in January. The core CPI also dropped to 3.1%, marking its lowest level since April 2021.
Initially, the market reacted favorably to this data, with Bitcoin briefly climbing above $84,000 and altcoins experiencing double-digit gains. However, this optimism was short-lived as BTC and equities retraced their gains, impacted by heightened trade tensions.
In a bold move, tariffs of 25% were imposed on steel and aluminum imports from Canada, prompting retaliatory tariffs on U.S. goods. The EU also responded with additional tariffs, further exacerbating trade friction.
Such developments have spurred more cautious investment strategies, leading to increased interest in safer assets such as gold and bonds over volatile cryptocurrencies like Bitcoin.
Given these dynamics, Bitcoin stands at a crossroads. Will it find stability and prepare for another upward movement, or are more corrections imminent? A deeper analysis is essential.
Institutional Investment Faces Challenges
Since mid-February, Bitcoin exchange-traded funds (ETFs) have experienced significant outflows, with money being pulled out at a rapid rate. Although there were brief periods of net inflows, these were minor compared to the predominant trend of outflows.
The largest recorded outflow occurred on February 25, with over $1 billion exiting in a single day, indicating a clear risk-off mentality among institutional investors.
Despite these trends, as of March 12, the leading ETF remains dominant, managing substantial BTC assets. Political ties also intertwine with Bitcoin, as several members within the administration hold significant Bitcoin stakes.
The open interest in Bitcoin, which indicates the total value of outstanding BTC derivative contracts, has been on a downward trajectory. After hitting $70 billion in January, it has since fallen to approximately $45.7 billion as of March 11.
However, an uptick in open interest has been observed recently, suggesting that traders may be cautiously re-entering the market as BTC shows signs of recovery.
This surge contrasts with the noticeable ETF outflows, signaling hesitance among institutions and a reduction in speculative trading activity.
Historical Trends Indicate Potential Rebound
Despite Bitcoin’s sharp decline, historical patterns and technical indicators imply that this could either signify a temporary low or the onset of deeper corrections.
Analysts note that Bitcoin has reached historically low Relative Strength Index (RSI) Bollinger Band percentages, a point where it rarely remains for long.
When the RSI Bollinger % hits extreme lows, it signals that Bitcoin might be oversold, suggesting that further declines may be limited.
Previous market cycles have shown that reaching similar RSI Bollinger % levels often precedes strong rebounds. Analysts have drawn parallels to historical patterns from 2013, 2016, and 2020, suggesting a recovery could be on the horizon.
However, the market’s future remains uncertain, as global economic conditions and potential Black Swan events could drastically affect Bitcoin’s trajectory.
Investors are advised to remain vigilant, monitor crucial support levels, and be prepared for increased volatility in the coming months. While historical data leans towards recovery, market movements can be unpredictable, driven by external shocks.
Disclaimer: This content does not constitute investment advice and is for educational purposes only.
