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Bitcoin’s Prolonged Range Play Concludes Bearishly
The 12.6% drop observed in the first three days of the week (per UTC hours) marks the largest decline since the FTX bankruptcy in November 2022, according to data from TradingView.
Institutional Demand Wanes
The sell-off is consistent with CoinDesk’s analysis earlier this month, which noted investor disappointment over the lack of swift action from President Donald Trump’s administration on creating the promised national BTC reserve and tightening fiat liquidity conditions. Institutional demand for the largest cryptocurrency and its second-largest peer, ether (ETH), weakened, pushing the CME futures market closer to backwardation, a market condition where spot prices are higher than prices for futures.
Nasdaq Slumps
Additionally, the Nasdaq, the Wall Street’s tech-heavy index, has also come under pressure, adding to BTC’s woes.
BTC’s Three-Day Candlestick Chart
Figure: BTC’s three-day candlestick chart. (TradingView/CoinDesk)
What’s Next?
The path of least resistance appears to be on the downside, as the Trump tariffs story could heat up again as the March 4 deadline for tariffs against Canada and Mexico nears. The first shots fired early this month had led to a broad-based risk-off mood.
Bulls Shouldn’t Pin Hopes on Friday’s Core PCE
Those pinning hopes on Friday’s U.S. "core" Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation measure, to put a floor under risk assets might face disappointment, according to Noelle Acheson, author of the "Crypto is Macro Now" newsletter.
Potential Support Levels/Demand Zones
Per technical analysis theory, a downside break of a prolonged range play, as seen in BTC, usually leads to a notable drop, equivalent to the breadth of the range. In other words, the downside break of the $90K-$110K range means a potential for a slide to $70,000.
Markus Thielen’s Analysis
Markus Thielen, founder of 10x Research, suggests that BTC has bounced to $86,000 at press time, having tested a supposed demand zone at around $82,000. This level was identified by analyzing an on-chain metric called the short-term holders’ realized price – the average price at which addresses holding coins for less than 155 days have purchased their BTC – suggesting the potential demand zone is around $82,000.
Regulatory Clarity Ahead?
Some analysts are hopeful that regulatory clarity in the wake of Wednesday’s Senate Committee hearing on "Exploring a Bipartisan Legislative Framework for Digital Assets" could lift market valuations.
Conclusion
In conclusion, the recent drop in BTC’s price is a result of a combination of factors, including institutional demand waning, the Nasdaq slumping, and the Trump tariffs story heating up. While some analysts are hopeful that regulatory clarity may provide a boost to the market, others believe that the path of least resistance is on the downside.
FAQs
Q: What is the significance of the $90K-$110K range in BTC’s price action?
A: A break of this range could lead to a significant drop in BTC’s price.
Q: What is the potential demand zone identified by Markus Thielen?
A: The potential demand zone is around $82,000, based on the short-term holders’ realized price.
Q: What is the significance of the Trump tariffs story in the context of BTC’s price action?
A: The Trump tariffs story could lead to a broad-based risk-off mood, which could negatively impact BTC’s price.
Q: What is the significance of the Nasdaq’s slumping in the context of BTC’s price action?
A: The Nasdaq’s slumping could be a sign of a broader market downturn, which could negatively impact BTC’s price.
