Bitcoin (BTC-USD) Faces Critical Test as Bear Market Deepens
Bitcoin (BTC-USD) has officially entered bear market territory, slipping more than 20% from its January peak of $109,000. The recent plunge has left the world’s largest cryptocurrency hovering near $86,000, with growing fears of a deeper correction toward key technical levels. Institutional outflows, macroeconomic headwinds, and technical breakdowns have combined to drive selling pressure, making this one of the most challenging periods for BTC-USD in recent months.
The price decline accelerated after Bitcoin fell below its 200-day Exponential Moving Average (EMA) for the first time since September 2024, a crucial level that many traders see as a dividing line between bullish and bearish momentum. Bitcoin briefly touched $82,133 before rebounding to $86,000, but the failure to reclaim the $90,000 threshold has left investors concerned about a prolonged downtrend. CME futures data indicates that hedge funds are unwinding positions in BlackRock’s IBIT, which, coupled with over $2.3 billion in outflows from spot Bitcoin ETFs, has created additional downward pressure.
Institutional Outflows and ETF Sell-offs Add to Downside Risk
The past week has seen an exodus from Bitcoin ETFs, with more than $3 billion in redemptions, as hedge funds that had been exploiting arbitrage strategies now unwind their positions. These outflows have set off a chain reaction, forcing ETF issuers to liquidate their underlying Bitcoin holdings to meet investor redemptions. The collapse of the once-lucrative market-neutral "basis trade" in CME Bitcoin futures, where hedge funds capitalized on price discrepancies between futures and spot BTC, has compounded selling pressure. Open interest in CME Bitcoin futures has dropped by 25% since its December peak, further signaling reduced institutional participation.
Adding to the bearish momentum, JPMorgan analysts have warned that Bitcoin futures are approaching backwardation—where spot prices trade higher than futures contracts—typically a bearish signal indicating weak near-term demand. The overall decline in institutional interest has left Bitcoin vulnerable to further declines, particularly as speculative traders and retail investors react to negative price movements.
Macroeconomic Headwinds: Trump Tariffs and Stagflation Concerns Weigh on Sentiment
Bitcoin’s decline coincides with broader macroeconomic concerns. President Donald Trump’s renewed focus on imposing 25% tariffs on European Union imports, alongside existing trade tensions with China, Canada, and Mexico, has fueled investor uncertainty. These tariffs threaten global economic stability and have contributed to a risk-off sentiment, with equities and commodities also facing pressure. The consumer confidence index recently missed expectations (98 vs. 103 forecast), reinforcing fears of slowing economic growth. Meanwhile, whispers of stagflation—where inflation remains high while economic growth stagnates—are gaining traction, further denting risk appetite.
The Federal Reserve’s commitment to keeping interest rates elevated has also played a role in Bitcoin’s decline. As higher rates make traditional investments like bonds more attractive, speculative assets such as BTC-USD often struggle to find demand. A strengthening U.S. dollar has exacerbated this trend, pulling liquidity away from cryptocurrencies. The stock market’s weakness has also contributed to Bitcoin’s fall, with Tesla breaking below the key $300 support level and signaling broader risk aversion among investors.
Technical Breakdown: Critical Levels to Watch for BTC-USD
Bitcoin is now at a pivotal technical level. The failure to hold above the 200-day EMA at $85,650 raises the likelihood of a deeper correction. If BTC-USD cannot reclaim $88,000, the path of least resistance is downward. The next major support lies at $78,000, followed by $73,800, a level that previously served as resistance in 2024. A breakdown below these levels would confirm a double-top pattern, setting the stage for a potential move toward $66,900.
On the upside, BTC-USD needs to break above $90,000 to shift sentiment. A sustained move beyond this level could see Bitcoin retest its three-month consolidation range, with $92,000 acting as the next major resistance. Above this, psychological resistance at $100,000 would be the next major target. However, for now, the bears remain in control, with the recent inability to regain momentum suggesting further downside risk.
Market Sentiment: Is the Bottom Near or Will Bitcoin Crash Further?
Bitcoin’s rapid decline has sent the Relative Strength Index (RSI) near oversold conditions, currently sitting at 30. While this suggests BTC-USD may be due for a short-term bounce, the overall trend remains bearish. The Moving Average Convergence Divergence (MACD) remains negative at -2,818, signaling ongoing downward momentum. Oscillators remain mixed, with the Stochastic indicator at 17 and momentum at -10,014, further indicating selling pressure.
Arthur Hayes, former BitMEX CEO, has issued a stark warning, predicting that Bitcoin could fall as low as $70,000. He believes the current downturn is just the beginning, as liquidity dries up and risk assets face further selling pressure. However, not all analysts are bearish. Michaël van de Poppe argues that this correction is merely a liquidity hunt before the next leg up, with Bitcoin needing to dip below $90,000 to trigger resting buy orders. He sees the $83,000–$87,000 range as a key accumulation zone, potentially setting the stage for a strong rebound.
Future Outlook: Is BTC-USD a Buy, Sell, or Hold?
Bitcoin remains at a crucial inflection point. If it can stabilize above the $85,000–$86,000 range and break back above $88,000, the market could see renewed bullish momentum. A strong push past $90,000 would further reinforce this case, potentially setting BTC-USD on a path toward $100,000. However, if selling pressure persists and BTC-USD falls below $82,000, the next downside targets of $78,000 and $73,800 come into play.
Standard Chartered remains optimistic, maintaining a long-term target of $200,000 for 2025, with a speculative case for $500,000 under a second Trump presidency. The bank points to increasing institutional adoption, regulatory clarity, and Bitcoin’s role as digital gold as key drivers for future growth. However, short-term traders should be cautious, as BTC-USD remains highly volatile with continued risks to the downside.
For now, Bitcoin is a hold for long-term investors but a sell for traders expecting further downside. If BTC-USD can reclaim key resistance levels, it may become a buy, but until then, caution remains warranted as macroeconomic pressures and institutional selling continue to dictate market movements.
