Bitcoin Drops 32% From Peak Amid US-China Trade Tensions

Bitcoin experienced a notable price fluctuation on Tuesday, reaching a high of $80,000 before retreating below $77,000. This volatility was primarily driven by market jitters stemming from the ongoing trade tensions between the United States and China. The digital asset's price surge was initially sparked by false reports suggesting that the Trump administration would temporarily halt tariffs for 90 days. However, this optimism was short-lived as the market digested the reality of the situation, leading to a correction.

The price movements have had a profound impact on short-term Bitcoin holders, who are defined as those who have held their assets for less than 155 days. According to market analysts, these investors are currently experiencing significant pain, with almost 100% of their supply underwater and holding losses. This represents over 25% of the total Bitcoin supply. The short-term holder MVRV ratio indicates an average unrealized loss of about 18%, a level last seen during the 2024 price action when Bitcoin dropped to $52,000. The situation is reminiscent of the depths of the bear market, where short-term holder unrealized losses reached lows of 40%.

Despite the market turmoil, there are signs of stability and accumulation. Whales, or large investors, have been accumulating Bitcoin as of the end of March, even amidst panic selling from newbie investors and traders. The asset has found support at the $74,000 level, which aligns with the first major supply cluster below $80,000. This support level, along with the cost basis clusters between $74,000 and $70,000, suggests that the downside may slow down from here.

The current Bitcoin correction, which is around 32% from its peak price on January 20, is in line with corrections observed in previous bull market cycles. This correction is very close to equaling the retracement depth of the Post-Halving pullback of almost 33%. The market's volatility is expected to continue as the trade tensions between the United States and China persist, with the People’s Republic stating that it will fight until the end. This ongoing conflict could add more market volatility in the coming days.