Bitcoin’s Recent Decline Signals Troubling Trends
Bitcoin saw a significant drop on Tuesday, pushing the cryptocurrency market toward its largest monthly decline since 2022, a year marked by numerous corporate bankruptcies.
The original cryptocurrency fell by as much as 3.1%, landing around $62,557 before stabilizing near $63,500 at 9:50 a.m. in New York. Currently, it has decreased about 19% in February, setting it up for its worst monthly results since June 2022. That June, the collapse of the TerraUSD stablecoin triggered a ripple effect involving the downfall of crypto hedge fund Three Arrows Capital and lender BlockFi.
Bitcoin’s slump has now stretched for five consecutive months, making it the longest losing streak since 2018. This has been a trying time for the crypto sector, reminiscent of the collapse that followed the peak of the initial coin offering boom.
The latest decline is part of a broader trend that began in October, coinciding with a global risk-off sentiment that emerged after President Donald Trump announced plans to increase global tariffs to 15%. This announcement spooked many investors, adversely affecting stocks and other risky assets.
“Trump’s decision to raise global tariffs has unsettled risk assets broadly, and Bitcoin is no exception,” noted Rachel Lucas, a crypto analyst at BTC Markets. “Even with the ‘digital gold’ narrative, Bitcoin behaves like a risk asset. When fears grow in the macro landscape, people tend to flee to traditional safe havens. Bitcoin hasn’t reached that point yet.”
The repercussions of the 2022 cryptocurrency market crash are still being felt. Recently, administrators from Terraform Labs, the company behind TerraUSD, filed a lawsuit against Jane Street Group LLC. The bankruptcy court-appointed administrator, Todd Snyder, claims Jane Street used nonpublic information to execute front-run transactions that exacerbated Terraform’s collapse.
A spokesperson for Jane Street described the lawsuit as “desperate” and a blatant attempt to extract funds.
Uncertainty has clouded the crypto market ever since the massive sell-off commenced four months ago. Bitcoin has perforated several major support levels as it continues to decline.
“Bitcoin finds itself under pressure, with investors at a loss for any immediate catalysts for price increases,” remarked Pratik Kalla, a portfolio manager at Australia-based Apollo Crypto. He noted BitDeer Technologies’ choice to liquidate all its Bitcoin, which further stresses miners.
“Mining Bitcoin typically costs about $80,000, meaning many operations are functioning below break-even and will likely remain net sellers for a considerable time,” he added.
On Monday alone, over $200 million was lost from the U.S.-listed Spot Bitcoin ETF. Additionally, demand for downside protection has surged to nearly double that of bullish positions in options trading, according to data from Deribit. The next support level appears to be around $60,000, a figure Bitcoin approached earlier this month.
IG Australia analyst Tony Sycamore highlighted that Bitcoin is nearing its 200-week moving average of $58,503. Whether it can hold above this threshold in early February might be crucial for price stabilization.
On the flip side, breaking below the $58,000 to $60,000 support zone “could lead to a more pronounced pullback,” Sycamore cautioned.
The entire cryptocurrency market is feeling the strain as well. According to CoinGecko, the total market cap for all cryptocurrencies decreased by more than $120 billion from Monday to Tuesday. Ether, the second-largest digital currency, fell approximately 3.3% to $1,802 on Tuesday
