- The Bitcoin bull market appears to have cooled, with BTC falling below the 200-day EMA on Monday.
- An industry expert provides insights on Bitcoin’s current consolidation phase, cautioning that this might persist for several months.
- BTC dipped to a low of $78,372, with technical indicators pointing towards a likely further decline.
On Monday, Bitcoin erased all its gains since November 10, reaching a low of $78,372. The main factors affecting BTC are macroeconomic events, Trump’s tariff announcements, the performance of US equities, and diminishing demand from institutional investors.
Bitcoin has slipped below critical support at the 200-day Exponential Moving Average (EMA), which stands at $85,722. Two important momentum indicators, the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD), suggest that a further drop in Bitcoin’s price is probable.
The RSI is trending downward on the daily chart, while the MACD shows red histogram bars below the neutral line, indicating a negative momentum trend for Bitcoin prices.
BTC/USDT daily price chart
Three factors contributing to Bitcoin’s decline
The anticipated bull run for Bitcoin in 2024 was initially triggered by the approval of US-based spot Bitcoin Exchange Traded Funds (ETFs). This development propelled the token to an all-time high and led to its integration into the assets of various institutions. However, recently, institutional investors have withdrawn funds from BTC, responding to a risk-averse climate amid increased volatility and price fluctuations.
Data indicates that Bitcoin ETF net inflows have been negative for several consecutive days over the past two weeks. This trend highlights diminishing interest from institutions, further supporting a bearish outlook for BTC.
Bitcoin ETF flows
A recent report emphasizes the impact of the options market on Bitcoin’s price volatility. Analysts note that Bitcoin has entered a more volatile price range, fluctuating between $85,000 and $92,000.
Last week, $3 billion worth of Bitcoin and Ethereum options contracts expired, contributing to price oscillations. Analysts remarked:
“The realized volatility of options exceeded 80 percent, indicating increased instability as traders responded to changing macroeconomic conditions. Implied volatility surged by 35.7 percent prior to the summit, as traders began hedging their positions.
Nonetheless, on-chain data revealed that many traders experienced significant losses last week, with realized losses across the market reaching $818 million per day, marking February 28 and March 4 as two of the largest single-day loss events of this cycle. Such widespread capitulation often precedes the stabilization of markets, although geopolitical and macroeconomic factors continue to be a substantial concern.”
Historical volatility in Bitcoin
Bitcoin’s relationship with traditional markets is another important factor affecting BTC prices. An industry expert noted that, when viewed over the medium to long term, the price movements of Bitcoin and US equities are closely linked.
The expert commented:
“The crypto market is unlikely to flourish if the equity market experiences a significant downturn. While Bitcoin has the potential to develop into a hedging asset in the future, it is currently regarded as a high-risk asset, often reacting more strongly to market sentiment than traditional financial markets.
The demand for short-dated put options on BTC, ETH, and SOL indicates a cautious market outlook. How does this relate to broader risk appetites in both traditional and digital asset markets?
The conditions in the US bond market suggest a risk-off atmosphere, resulting in increased selling pressure in the equity market and across other asset classes, including crypto. Investor uncertainty has significantly increased in the past week. Typically, there is a rise in options trading during such times, as traders mainly use this instrument to hedge against risks in their spot market positions.”
What could drive a sustained recovery for Bitcoin?
The expert suggests that favorable economic data and inflation trends might lead to expectations of gradual monetary easing.
“Positive inflation readings and economic indicators could bolster expectations for a gradual and managed easing of monetary policy, potentially attracting capital to financial markets and supporting cryptocurrency prices.
While news regarding strategic reserves could provide short-term support for prices, consistent crypto acquisitions would be essential for a meaningful long-term effect. The challenge remains that the US government has not laid out definitive plans for Bitcoin acquisition. Overall, this poses a significant internal growth opportunity for the crypto market, but macroeconomic factors continue to dominate across all financial sectors,” he added.