Bitcoin's value has taken a nosedive, dipping below $80,000 and marking a 14% decrease in just a week. The top cryptocurrency is currently hovering around $77,800, while Ethereum has also seen a decline, dropping to $1,860 – its lowest point since November 2023.
This downward trend is happening in a climate of heightened market uncertainty, with emotions running high as they did during the bear market of 2022.
Fear-Driven Bitcoin Sell-offs
The crypto market sentiment has shifted dramatically towards fear. The Crypto Fear & Greed Index, which reached sky-high levels of over 92 last year, is now at a mere 17. This shift indicates a broad correction in the market, fueled by substantial outflows of capital from digital assets.
Total liquidations in the past four hours have exceeded $195 million, with long positions accounting for $161 million.
This sell-off implies that many traders were caught off guard, resulting in forced liquidations that have accelerated Bitcoin's decline.
Institutional Investors Reduce Exposure
Institutional investors have been steadily offloading digital assets for the past four weeks. During the week ending March 7, a total of $876 million flowed out of digital asset investment products.
This ongoing trend brings the four-week outflow to $4.75 billion, significantly reducing the year-to-date inflows to a mere $2.6 billion. Bitcoin has absorbed the brunt of these outflows, losing $756 million in the process.
The total assets under management in digital funds have plummeted by $39 billion from their peak, now resting at $142 billion – the lowest since mid-November 2024.
Market Pressure and Uncertainty
US policy changes have also played a role in intensifying selling pressure in the market. President Trump's latest tariffs on countries like Canada, Mexico, China, and potentially the EU have driven institutional investors away from risky assets like cryptocurrencies.
The market has reacted to Trump's comments during Friday's White House Crypto Summit, causing more uncertainty and further selling.
Looking Ahead for Bitcoin
The prognosis for Bitcoin is uncertain. Former BitMEX CEO Arthur Hayes predicts a potential drop to $70,000 before a new bullish cycle emerges. Market experts are divided on the future trajectory of Bitcoin, with liquidity trends and market sentiment playing crucial roles in deciding its fate in the coming weeks.
MicroStrategy's move to raise funds through preferred stock issuance for potential Bitcoin acquisitions adds another variable to the mix. Overall, Bitcoin's future trajectory remains under pressure, awaiting further developments to see whether this dip will continue or pave the way for a fresh rally.