Bitcoin Plummets 29.7% as Institutional Outflows Intensify

Bitcoin has recently experienced a significant decline, dropping from its all-time high of $109,590 on January 20 to $77,041 the previous week, marking a 29.7% decrease. This adjustment is the second major correction in the current bull cycle, which typically sees around 30% drops before resuming strong growth. However, unlike previous cycles, the current rally has been characterized by shallower corrections due to the strong participation of institutional investors and demand from Bitcoin ETFs. Currently, capital is flowing out of U.S. spot Bitcoin ETFs, with a total of $921.4 million withdrawn in the past week, indicating that institutional investors have not yet returned to balance the selling pressure.

Short-term investors continue to face unrealized losses, increasing selling pressure. Those who bought Bitcoin in the last 7 to 30 days are the most likely to capitulate. Historically, when new money flow slows and the cost basis trend changes, it signals weakening demand. This is more evident as Bitcoin struggles to maintain above key support levels. Without new buyers, Bitcoin could enter a prolonged accumulation phase or even deeper decline as weak hands continue to exit.

The key factor to watch now is whether long-term investors or institutional money will return at these lower prices. If the "deep pockets" start absorbing supply, it could trigger an accumulation phase, stabilizing prices and reversing market sentiment.

The U.S. economy is at a crossroads: the labor market remains strong but is cooling, inflation is slowing, but consumer confidence is declining. In February, inflation remained stable due to falling airfare and gasoline prices offsetting rising housing costs. However, supply chain disruptions and tariff pressures could push prices higher in the coming months. Job growth increased in January, while layoffs hit a seven-month low, indicating stability. However, the hidden unemployment rate is rising, and trade uncertainty, particularly new tariffs on key imports, is weighing on business sentiment. Consumer confidence has fallen to its lowest level in over two years, with expectations of rising inflation and economic uncertainty dimming prospects for both households and businesses. How the Fed responds to trade policies and inflation risks will determine whether the economy stabilizes or continues to weaken.

In the past week, the Cboe BZX exchange proposed a wager for Fidelity's Ethereum Fund, which could drive capital into ETH ETFs, especially if staking yields (around 3-4% annually) are integrated. However, SEC oversight remains a significant hurdle. In Thailand, the Securities Commission approved the trading of USDT and USDC on licensed exchanges, setting a legal precedent that could influence global stablecoin policies. In the U.S., Senator Cynthia Lummis reintroduced the BITCOIN Act to establish a Strategic Bitcoin Reserve, aiming to enhance financial security, although it faces opposition from banking organizations and the Fed. Meanwhile, Strategy™ announced raising $21 billion through a stock issuance to expand its Bitcoin portfolio, reinforcing institutional interest but also attracting regulatory attention. These developments indicate that crypto is gradually integrating into traditional finance, bringing long-term impacts to the market.

The market is awaiting a new catalyst. Are you ready to seize the opportunity when confidence returns? Stay tuned for the next updates from Bitfinex Alpha!