(Bloomberg) — Bitcoin appears poised for its most challenging week since early March, and there doesn’t seem to be much enthusiasm among investors to step in and buy the dip. This follows a downturn that has caused a staggering $300 billion loss in the digital asset market.
The cryptocurrency has dropped 6.2% this week, dipping below $100,000 for the first time since June. Analysts are highlighting several indicators that are sounding alarms for Bitcoin and the wider market.
This all comes after a notable shift in sentiment since early October when Bitcoin reached record highs due to fervent margin buying. Confidence hasn’t bounced back after the rapid loss of $19 billion in leveraged positions across various cryptocurrencies shortly thereafter, a situation that has exposed underlying vulnerabilities.
Galaxy Digital, led by Michael Novogratz, revised its Bitcoin price target down from $185,000 to $120,000, pointing to “significant deleveraging.”
In an interview, Skybridge Capital’s founder Anthony Scaramucci compared the market dynamics to driving a sports car on an icy road, suggesting that the margin leverage can make the decision to halt painful.
A month post Bitcoin’s peak at $126,251, there are multiple signals indicating a bearish outlook in the cryptocurrency landscape.
According to CryptoQuant, Bitcoin dropping below its 365-day moving average at around $102,000 could precede a significant sell-off. This support, which has held firm since early 2023, now shows signs of weakening.
They noted that the 365-day moving average has been a critical support level during the bull cycle and previously signaled the beginning of the bear market from December 2021 to January 2022. A failure to bounce back above this level could lead to a notable correction in Bitcoin prices.
In the tech space, despite concerns about inflated valuations in artificial intelligence, technology stocks have seen sharp fluctuations this week, although traders are buying amidst this weakness. The Nasdaq 100 index is only 2% off its record high from October 29, while the broader S&P 500 is approaching its all-time high as well.
Contrastingly, Bitcoin hasn’t attracted the same buying momentum, remaining nearly 20% below its recent high. Open interest in Bitcoin futures has dropped by more than $25 billion since its October peak, indicating reluctance among investors to increase bullish positions, as Coinglass data shows.
It’s somewhat frustrating, really, that Bitcoin’s correlation with other risk assets seems to have deteriorated, even as equities experience sell-offs this week, commented IG Australia market analyst Tony Sycamore.
The ongoing US government shutdown also seems to have affected digital assets disproportionately. Since it began on October 1, the crypto market has had to rely on a mix of private sector metrics for momentum, according to QCP Capital’s observations.
The US Spot Bitcoin exchange-traded fund, which brought significant inflows into crypto assets after its launch in January 2024, has lately weighed down the market. There have been over $2 billion in outflows from these ETFs continuously for six trading days.
Timothy Michiel, who reviewed the analysis from BRN, noted that this trend reflects a hesitance among US institutional investors to prioritize capital protection in light of ongoing funding stresses and uncertainty in policies.
