Bitcoin’s Recent Decline

Bitcoin’s dip below $60,000 last Friday marked the worst week for the cryptocurrency since the collapse of FTX in 2022.

While the current market dynamics seem relatively benign, analysts are raising concerns. They suggest that the recent modest recovery could be fleeting as the underlying vulnerabilities of Bitcoin become clearer.

Investors are stepping back from Bitcoin exchange-traded funds, coupled with weak technical indicators and shifting expectations about interest rates. This current crypto winter feels less severe than previous ones, but it raises the question—could worse times lie ahead?

“I think there’s still a chance for more declines,” remarked Griffin Ardern, co-founder of Primal Fund, a multi-asset management company. “We’re nowhere near finding the true bottom yet,” he added.

Bitcoin did see a slight rebound after falling 16% over the week ending Sunday. Still, this represents the steepest weekly drop since FTX’s bankruptcy led to a 23% plunge in November 2022. The downturn started the year on a poor note, following the collapse of the TerraUSD stablecoin, which wiped out $40 billion in value and triggered a wave of bankruptcies.

Currently, Bitcoin’s price dropping below $60,000 is its lowest since October 2024 and reflects a more than 50% decline from last year’s peak of over $126,000. On Tuesday, it fell by 4.3%, trading around $62,100 as of late afternoon in New York.

This recent decline partly stemmed from Michael Saylor’s company, Strategy, selling a small portion of its Bitcoin holdings, contradicting the belief that it wouldn’t sell.

However, the company’s strategy shifted on Monday when it announced the acquisition of 1,550 Bitcoins for around $101 million, significantly more than the $2.5 million it sold. Yet, regaining market confidence might not be straightforward.

On the technical side, signals have weakened. Last week, Bitcoin dipped below its 200-week moving average, a key indicator many traders rely on for market support. A shift below this level often leads to increased caution since it suggests a potential bearish trend.

Prime Minister Jacinda Ardern mentioned that normally bullish long-term options aren’t the case right now.

Meanwhile, investors have started to react; around $5.5 billion has been pulled from U.S.-listed Bitcoin ETFs over a span of 13 consecutive days of net outflows.

Paul Howard from the crypto trading firm Wincent described the current economic climate as a “quiet bear market,” noting that there’s no equivalent to an FTX-style crash.

According to Howard, “the break below the 200-week moving average confirms that we may be entering a bearish phase.” With Bitcoin’s volatility on the rise, he cautioned that this rally might not last.

Interest rate expectations are, in part, to blame. Rising anticipated borrowing costs seem to be drawing funds away from risky assets, including cryptocurrencies.

The unresolved conflict between the U.S. and Iran, combined with strong employment data, has shifted market expectations away from anticipated rate cuts by the Federal Reserve toward the potential for rate increases.

Rajiv Sawhney, head of international portfolio management at Wave Digital Assets, noted this significant reversal. He commented on how Bitcoin has lost its positive correlation with U.S. stocks, as investments have flowed from cryptocurrencies into tech sectors like artificial intelligence. He doesn’t foresee a return of funds to cryptocurrencies even if the stock market shifts.

Compared to past crypto winters, this current correction seems mild; Bitcoin has only dropped about 50% from its peak, while previous downturns saw declines around 80%. After hitting its peak in 2021, Bitcoin took over a year to find a bottom and another 15 months to recover.

This history makes some traders hesitant to call a definitive floor.

Hayden Hughes, managing partner at Tokenize Capital, pointed out that companies holding significant cryptocurrency reserves pose a unique risk to the industry. If funding conditions tighten or stock prices fall, these firms could be compelled to sell.

Hughes also warned about systemic risks that could affect stock markets in the months ahead, which might spill over into cryptocurrencies.

He added that while Bitcoin’s current decline differs from previous trends, the word “yet” casts a long shadow.