Bitcoin Faces Price Pressure Amid Market Uncertainty
Recent fluctuations in Bitcoin’s (BTC) price have highlighted a phase of consolidation before it dipped below the $90,000 mark, following its inability to surpass its all-time high in February. The latest “Bitfinex Alpha” report indicates that increasing macroeconomic uncertainty is exacerbating these challenges.
In the past week, Bitcoin experienced a trading range of 6.5%, reaching a high of $99,574 on February 21, only to close at $96,346. However, it has since seen a further decline of 7.5%, bringing its price down to $88,600 at the time of reporting. Two major incidents contributed to this market decline: a security breach involving the crypto exchange Bybit and a significant drop in value after the expiration of S&P 500 options. The latter event triggered a temporary dip below $95,000, although Bitcoin managed to recover afterwards.
As of February 22, Bitcoin had dropped 5.9% from its recent high and is currently down 19%, despite a notable 48.4% increase in November 2024. Similarly, Ethereum (ETH) and Solana (SOL), which also saw considerable gains late last year, have receded by 16.9% and 33.1%, respectively. Volatile assets such as memecoins have suffered a 37.4% decline after a remarkable 90.2% surge in December 2024, averaging a 12% decrease across the board in just the last 12 hours.
This contraction is not limited to the cryptocurrency sector; the broader financial markets are also under pressure. The S&P 500 has struggled to maintain a rally above the 6,000 mark, currently standing at 5,950 in pre-market trading. A 2.1% decline in equities on February 21 mirrored the downward trend seen in risk assets, including cryptocurrencies, with further drops occurring on February 24. The correlation between crypto and traditional markets remains strong, as investors respond to overarching macroeconomic indicators.
Institutional Interest Slumps in Bitcoin ETFs
Bitcoin exchange-traded funds (ETFs) have experienced a significant drop in inflows, signaling a waning interest from institutional investors. Daily acquisitions of Bitcoin ETFs in the U.S. have decreased from 4,000–5,000 BTC in November to under 1,000 BTC over the past week. Moreover, ETF outflows reached a peak of $360 million on February 20, indicating a decline in bullish sentiment.
Despite this downturn, buying activity has shown some resilience at lower price levels, with Bitcoin ETFs accounting for over 8% of the global spot trading volume on February 21. Conversely, participation in Ethereum ETFs remains weak, with net flows stagnating near zero for certain funds. This lack of demand from institutional players suggests a cautious approach towards cryptocurrency investments in the current market landscape.
A broader decline in capital inflows is also visible within the perpetual futures market, where open interest (OI) for major assets has dropped significantly. Over the past month, Bitcoin’s OI fell by 11.1%, while Ethereum and Solana experienced declines of 23.8% and 6.2%, respectively. Memecoins faced the steepest drop, with a staggering 52.1% reduction in OI, underscoring their dependence on speculative trading.
The decrease in leveraged positions indicates that traders are reducing their exposure amid diminishing momentum and growing uncertainty. The report highlighted that the most significant OI retracements are occurring in assets characterized by higher volatility, further emphasizing the risk-averse sentiment prevalent among market participants.
Negative Sentiment and Potential for Further Declines
Before the recent downturn, Julio Moreno, the head of research at CryptoQuant, pointed out that on-chain data suggested Bitcoin demand had entered negative growth territory for the first time since September. This condition complicates Bitcoin’s ability to stage a rally and raises the likelihood of a deeper price correction, which appears to be unfolding.
Additionally, this situation has amplified negative sentiment among investors. According to insights shared by Milk Road on X, even though Bitcoin is currently 14% below its previous all-time high of $109,354, market sentiment mirrors levels observed in August 2024. During that time, Bitcoin was valued at about $55,000 before experiencing a significant crash following the Yen carry-trade incident.
