Bitcoin Plummets 22% From All-Time High, Echoing 2018 Crash

Bitcoin has recently experienced a 22% decline from its all-time high of $109,000, drawing comparisons to past bull cycle corrections. This decline has raised questions about whether Bitcoin is following historical patterns, particularly those seen during the 2016-17 bull run and the 2018 crash.

During the 2016-17 bull run, Bitcoin delivered a 122.8% full-year return but ended the first quarter down 4% from its opening price of $434.46. In contrast, the 2018 crash saw Bitcoin close the cycle with a 72% yearly decline, bottoming at $3,740.50. The macro conditions at the time, including a trade war with China and escalating tariffs, closely resemble today’s economic landscape.

In 2018, inflation spiked to a two-year high of 2.9%, leading to a 40% quarterly decline in Bitcoin’s value. Now, as the second quarter of this year unfolds, the crypto market faces renewed macro pressures. With $7 trillion in debt refinancing ahead, investors are shifting capital into safe-haven assets like bonds, confirmed by the 10-year treasury yield dropping to a two-month low. This trend could increase the probability of a 2018-style crash for Bitcoin and the broader crypto markets.

On-chain indicators also signal potential risks for Bitcoin. According to Glassnode’s latest report, Bitcoin’s market structure has shifted from accumulation to distribution, with consistent sell pressure since January. The Cost Basis Distribution (CBD) heatmap shows a decline in “buy-the-dip” activity below $92K, indicating reduced demand for accumulation. Short-Term Holders (STHs) are exhibiting signs of capitulation, with the STH Spent Output Profit Ratio (STH-SOPR) staying below 1, suggesting that many investors are selling at a loss.

This pattern closely resembles August 2024, when Bitcoin plummeted to $49K under intense selling pressure. At present, accumulation remains weak at critical demand zones, despite Bitcoin trading 22% below its all-time high of $109K. This reflects a clear risk-off sentiment, with buyers showing reluctance to enter the market. Coupled with prevailing macroeconomic challenges, the current scenario increasingly mirrors the 2018 crash, where extended distribution led to prolonged downward movements.

As a result, Bitcoin faces an elevated risk of further corrections before establishing a strong support level. Investors must closely monitor market trends and indicators to navigate this volatile landscape effectively. Understanding the potential for increased risk is essential in making informed decisions amidst challenging macroeconomic conditions.