⛏️Looking at the Bitcoin market right now, it's in a bit of a mess. Coming down from over $82,000, roughly a five percent drop this week and the whole vibe has changed from a 'buy the dip' attitude to a more hesitant one.
🏛️ Well-known triple threats in the market are hammering the crypto at the same time: the hawkish tone from the Federal Reserve, escalating US-Iran tensions and problems in the Bitcoin mining sector.
🌍Breaking down the Fed's move, they were really counting on Jerome Powell to signal a rate cut, but he basically poured water on those plans, saying that inflation still needs to be brought under control and they’re not in a hurry to ease. This is equivalent to saying that riskier assets, like Bitcoin, need to sit down and behave, which is just what happened.
When rate cuts get pushed further out, the expectation of liquidity drops, and Bitcoin doesn’t like that one bit, it's fuel for the correction we’re seeing.
Add in the uncertainty of Fed leadership and potential changes in its independence, and investors get nervous, which means less interest in volatile assets like BTC.
🌍War is brewing between the US and Iran again and markets don’t like that either, coming into what feels like risk-off mode. Whenever global tension rises, huge sums of money get taken out of risk and transferred to safer investments. That’s why we saw a massive influx to gold and a beating for the crypto market. Bitcoin, still considered a risk asset, is always the first one to get dumped in these situations, so naturally took a hit.
Spot Bitcoin ETFs suffered their biggest outflow since mid-November and nearly $1 billion left this week, this isn’t panic-selling by individuals.
It's basically the institutions who are starting to cool down, and that means less price support and a wilder ride downwards. Looking at the dip that followed the $1.8 billion liquidations, more than 90% of those were longs. This tells us that the market had a very optimistic outlook.
When overcrowded long positions and sudden market pressures are combined, a cascade of falls is the inevitable result, and once the price drops below key levels, forced selling accelerates the dump, much like a classic leverage flush.
Major winter storms in the US led mining operations to cut their activity, and since the drop, the network hashrate has plummeted, being the biggest decline since 2021. Lower hashrate means miner revenue stress, and stressed miners sometimes sell BTC to cover costs, a process that is only bad news in times of market weakness.
When I take a look at the on-chain data, it’s clear miner flows to exchanges have surged, meaning more pain. It's not a positive omen.
Technically, now that Bitcoin lost the 100-week EMA zone, a significant drop wasn’t halted and deeper downturns look possible and probable, Key levels traders are watching out for major support zones, which are prior low, $80.6K, 61.8% Fibonacci retracement zone $78.5K and the major corporate average entry levels in the area $76K. The stress that drives to panic levels could still send BTC price wick’s down into the zone around $70k wouldn’t be out of the question, then larger investors may come back in.
Bitcoin is up against numerous serious economic burdens, geopolitical anxiety, institutional outflows, total leverage wipeout and stressed miners, so no asset can just power through them all. What’s more, the truth is that corrections can often reset the marketplace. They get rid of bad leverage, make weak hands sell out, and calm down the talk, and that’s basically how more healthy upward trends are constructed.
Right now though, BTC isn’t fundamentally broken, it is facing challenges and trying to pretend otherwise will send traders to the cleaners.
When looking at the daily chart for Bitcoin, it didn't quite manage to push past the top of a flat zone at $90,000 on Wednesday, and the next day it plummeted by 5.21%, sealing its fate below the lower boundary of the zone at $85,600, and as of Friday it's carrying on its downturn, hovering around $82,500.
If the decline continues, the November low of $80,600 will be the next to be tested, a clean break below that would send the price plummeting towards the April 7, 2025 low of $74,508.
Coming in from a different angle, the RSI on the daily chart is at 30 and headed downwards, signifying very strong bearish momentum. The MACD indicator had a bearish crossover back on January 20th and has still got it’s red bars marching upwards under the neutral line, reinforcing the bearish outlook.
Well-known as a potential turnaround zone, if BTC does recover, it might just brush past the lower edge of that consolidation zone at $85,600, which also happens to be the 78.6% Fibonacci retracement from the April 7 low of $74,508 to the October 6 all-time high of $126,199.
#USIranStandoff #USGovShutdown #BitcoinETFWatch #FedHoldsRates