After a series of hacking incidents, the market sentiment has also dropped to the freezing point. Bitcoin has fallen for two consecutive days and briefly fell below $83,000 this morning. Following the previous days $1.5 billion liquidation, the entire network has liquidated $700 million in the past 24 hours, including $611 million in long orders and $154 million in short orders. In addition, in the past 24 hours, a total of 184,998 people worldwide have been liquidated, and the largest single liquidation occurred on Bitfinex - tBTCF 0:USTF 0, worth $8.2054 million.
According to Alternative data, todays cryptocurrency panic and greed index has dropped to 10 (yesterdays was 25), and market sentiment has turned from neutral to extremely fearful, hitting a new low since July 2022. In the recent market, Bitcoin has fallen sharply for many short periods of time. The following are the market reasons why Bitcoin fell, sorted by BlockBeats, for readers reference only.
IBIT large liquidation
BitMEX co-founder Arthur Hayes tweeted on February 25 that he believed the BTC flash crash was related to IBIT hedge funds. Many $IBIT holders are hedge funds who go long on ETFs and short on CME futures to get higher returns than the short-term U.S. Treasury bonds they invest in.
If this basis falls as $BTC falls, then these funds will sell $IBIT and buy back CME futures. These funds are in profit and given that the basis is close to US Treasury yields, they will close their positions and realize profits during the US trading session and Bitcoin could fall back to $70,000.
Arthur Hayes previously published a blog post predicting that because U.S. politics has not changed fundamentally due to Trumps election, cryptocurrency prices may fall back to the level of the fourth quarter of 2024.
Therefore, Arthur Hayes still believes that Bitcoin will retest $70,000 to $75,000. Only the Federal Reserve, the U.S. Treasury, Japan, etc. printing money in some form, or enacting specific legislation that allows permissionless cryptocurrency innovation, can improve the current market conditions.
The Bitcoin strategic reserve policy is terrible. The fundamental problem with governments hoarding any assets is that they buy and sell assets primarily for political interests, not financial interests. The policy may change with changes in the political situation, thereby changing the original trend of Bitcoin.
Related reading: Arthur Hayes new article: Beyond Bitcoin national reserves, the United States has other plans for crypto hegemony
Bitcoin strategic reserve expectations are delayed
Trumps plan for a strategic reserve of Bitcoin has been delayed, and market confidence is eroding. Arthur Hayes mentioned in a tweet some time ago that the fundamental problem with the government hoarding any assets is that they buy and sell assets mainly for political interests, not financial interests. And those who build truly decentralized technologies and applications do not have enough financial resources to play politics at this critical moment in the cycle. Therefore, the desire for cryptocurrency regulation may come true, and if it does, it will appear in an overly complex and prescriptive form that only large, wealthy centralized companies can afford.
This is indeed the case. On February 21, the probability of Trump establishing a strategic Bitcoin reserve within 100 days of taking office on Polymarket dropped to 10%. However, on January 20, the day Trump was sworn in as president, the probability rose to 48%.
The expectation of BTC strategic reserve has not been fully fulfilled. At the national level, Trump has not yet introduced a bill for BTC strategic reserve. He has even disappeared from the cryptocurrency market for some time. At the state level, many bills have only been proposed but rejected.
On February 24, the Montana House of Representatives voted against a proposed bill on February 22 that had proposed Bitcoin as a state reserve asset. The bill proposes to set up a special income account to invest in precious metals, stablecoins, and digital assets with a market value of more than $750 billion. Currently, only Bitcoin meets this standard. The bill was opposed by several Republican lawmakers, who believed that this would allow the State Investment Committee to over-speculate with taxpayer funds and the risk was too high. Supporters believe that if the bill is not passed, the state government will lose the opportunity to increase its return on funds. At present, the bill has been basically shelved, and if it is to be re-proposed in the future, it needs to be submitted to the legislature for review again.
On February 25, Cointelegraph reported that at the legislative meeting on February 24 local time, the South Dakota House of Representatives Commerce and Energy Committee decided to postpone the HB 1202 bill to the 41st day of this legislative session. However, the state legislative session is only 40 days at most, and this move is equivalent to vetoing the bill, which means that the state will not include Bitcoin as an official investment option for the time being.
Related reading: Arthur Hayes new article: Beyond Bitcoin national reserves, the United States has other plans for crypto hegemony
Is the bull market still there?
On the other hand, the poor performance of cryptocurrency-related stocks in the U.S. stock market has led to multiple constraints on risk liquidity. Liquidity has flowed from the crypto market to asset classes such as U.S. stocks, gold and U.S. bonds, limiting the injection of funds into the crypto market. Market expectations are also reflected in the market data. Specifically: Coinbase (COIN) fell 2.7%; Tesla (TSLA) fell 2.66%; Trump Media Technology Group (DJT) fell 5.59%; MicroStrategy (MSTR) fell 4.73%; MARA Holdings (MARA) fell 5.12%; Riot Platforms (RIOT) fell 4.67%; Hut 8 Corp. (HUT) fell 8.48%
A large part of the reason may be that the tariff issue has come late but it has arrived. The Trump administration announced that it will impose tariffs on Mexico and Canada on time, further strengthening the position of the US dollar, thereby strengthening the US dollar index. For the seven technology companies that account for a high weight in the Nasdaq index, there is a risk of declining sales due to tariff expectations, and there is a risk of liquidity outflow bursting the AI bubble.
Traders in the market also took out relevant data from the previous cycle and the cycle before that. The data showed that this cycle did not change its inherent form because of Trumps election. Many traders believed that we are in a correction period in the bull market, but it is generally bearish in the short term.
cburniske believes that the current market scenario is similar to the market in 2021, and believes that our current bull market is actually no different from the previous ones, and the data shows that we are actually in the middle of the bull market:
During the same period in 2021, Bitcoin ($BTC) fell 56%, Ethereum ($ETH) fell 61%, Solana ($SOL) fell 67%, and many other tokens fell more than 70-80%. While there are various reasons why this cycle is different from previous ones, the mid-term bull market we are currently experiencing does have historical precedent. Those who believe that the market has entered a full-blown bear market are actually misled.
@RaoulGMI compared the BTC macro structure in 2017 and believed that we would probably have to wait for 2-3 months before reaching a new high:
We need to be patient. This market environment is very similar to the macro structure in 2017: Bitcoin experienced five corrections, each of which exceeded 28%, and most of them lasted 2 to 3 months before reaching new historical highs. At the same time, other currencies (Alts) experienced a correction of about 65%. At this stage, the market is full of noise and uncertainty. Therefore, we should devote our energy to some more constructive activities than simply staring at the screen, rather than being bothered by market fluctuations.
Technical analyst @CryptoPainter_X believes:
The current market has some support in the short-term trend, but the overall situation is still in a range of fluctuations. After the 4-hour secondary demand zone has been touched, there may be a short-term support effect, especially when the spot premium is close to the 0 axis and fails to completely break the range of fluctuations. Given that the small and medium support zones of fluctuations are usually easy to break, it is necessary to pay attention to whether the previous rhythm will continue. If the small support is broken, it may mean the continuation of the downward fluctuation.
In addition, the current price has broken through the lower limit of the oscillation channel at 91400 (cyan line), and the K-line has not shown a long needle. The strength of the short-term rebound will determine the next trend. The cyan line coincides with the core demand area, which theoretically provides short-term support. However, as the channel is about to go down and may turn, the long-term trend is still biased towards the short side, which also suggests that the market may face further downward pressure.
Overall, although there may be a rebound in the short term, if it fails to break through the middle track or the range of fluctuations, the market may still maintain a weak and volatile trend.
