Bitcoin's New Downtrend: Experts Warn of Further Decline

Bitcoin, the world's leading cryptocurrency, has entered a new downtrend phase after consolidating around the mid-$90,000 levels. Following its all-time high of $109,000 in January, Bitcoin has experienced a significant drop of 7%, bringing its current price to approximately $87,400. This decline has raised concerns about the sustainability of the broader bull market as investor sentiment shifts towards fear.

Market expert Jesse Olson recently questioned whether Bitcoin is nearing a local top or possibly "the" top for this market cycle. He referenced historical data suggesting that previous pivot points for Bitcoin often signal significant downturns. In April/May 2021, the Bitcoin price experienced a pivot point about 20% below its local top, leading to a price drop of 56%. In November 2021, the pivot was around 15% from "the" top, resulting in a staggering 77% decline. Currently, the price sits approximately 15% below the recent peak, and Olson notes a pending sell signal on BTC's 3-day chart, indicating potential further downside.

Adding to the bearish sentiment, market expert Arthur Hayes expressed concerns in a recent post, warning of a potential extension of Bitcoin's downturn. He highlighted that many holders of BlackRock's Bitcoin exchange-traded fund (ETF), IBIT, are hedge funds that have gone long on the ETF while simultaneously shorting Chicago Mercantile Exchange (CME) futures to earn a yield greater than short-term US treasuries. Should Bitcoin's price continue to fall, Hayes suggests that these funds may unwind their positions, selling IBIT and buying back CME futures. This profit-taking strategy could lead to further declines in Bitcoin's price, potentially pushing it down toward the $70,000 mark.

Despite the prevailing bearish outlook, analyst Doctor Profit presents a more optimistic perspective. He emphasizes that the production cost of Bitcoin is currently at $95,000, meaning the market price is below this critical threshold. Historically, prices trading below production costs have signaled prime buying opportunities for investors. This situation creates a compelling case for potential investors, as the market often sees price rebounds when production costs are higher than market prices.