Bitcoin's Volatility Sparks Economic Collapse Fears

Bitcoin's recent volatility has sparked concerns about an impending economic collapse, with ominous signs suggesting a potential downturn for the cryptocurrency. As geopolitical tensions and trade wars escalate, investors are closely monitoring Bitcoin's performance amidst a backdrop of uncertainty.

In a press conference, Crypto Czar David Sacks revealed that his team is evaluating the creation of a Strategic Bitcoin Reserve. This move, if implemented, could provide a measure of stability and security for the cryptocurrency market. However, the US Senate must first confirm some cabinet members before the evaluation process can proceed.

Bitcoin's sharp drop below $92,000 on February 3 triggered an astounding $2.1 billion in liquidations, rattling the crypto market. Initially, investors seemed to brace for economic hardship from the US President Donald Trump's trade war announcement. However, concerns quickly shifted to whether Bitcoin had already peaked and was about to enter a downtrend.

Adding to the anxiety, Bitcoin Archive noted that every past BTC bull market had topped within 330 days of breaking the prior cycle's all-time high. February 4 marked day 328. Yet, Bitcoin quickly rebounded after the drop, with the Fear & Greed Index surging from 44 (fear) to 72 (greed). This raises the question of whether the market rebounded too quickly, and whether Bitcoin traders could be walking into a bull trap.

Despite the recent volatility, Bitcoin demand remains strong, consistently absorbing pullbacks even at historically high levels above $90,000. Glassnode analysis of Bitcoin's bull market drawdowns suggests that demand for BTC could rise, possibly triggering the market's "second euphoric phase." Historical data shows that in the past three cycles, corrections averaged around 25%, followed by an acceleration in price performance during the final third of the bull run. The current bull market is yet to experience such an acceleration.

On the supply side, a key metric to watch is the Long/Short Term Holder Threshold. It tracks capital rotation from long-term investors to new buyers, providing a clearer view of supply dynamics. Bitcoin cycle peaks often align with long-term holders taking profits and offloading their coins to newcomers. Glassnode data shows that this is not the case yet, with long-term holders still retaining a significantly larger share of the supply,