Bitcoin’s value experienced a significant decline last week, dropping as low as $60,000 during its worst weekly performance in three years. The cryptocurrency plummeted by 16%, closing at $70,008, which marks a staggering 45% decrease from its all-time high of $126,273 recorded in October of last year. This decline has effectively erased all gains made since President Trump’s re-election in 2024.
Meanwhile, Ether also faced a serious downturn, falling by 24% to $2,052, which represents a 59% drop from its record high reached last year.
The sentiment in the market has turned bearish, with many investors anticipating further volatility. Analysts have indicated that a breach of the $60,000 threshold could trigger a tumultuous phase for Bitcoin’s price. Such pressure can be attributed to several factors, including an increase in bearish bets. Kenin Spivak, chairman and CEO of SMI Group LLC, emphasized that trading Bitcoin is based largely on speculation and is fraught with risk.
Data from Deribit, a cryptocurrency options market, indicates that the majority of contracts are now positioned for Bitcoin to fall below the $60,000 mark. This threshold is critical, as many Bitcoin-backed loans are structured in a way that forces liquidation of collateral if the price dips below this level, potentially leading to a cascade of selling and further declines.
Investor sentiment has been compounded by warnings from notable figures in finance. Michael Burry, known for his prescient bet against the US housing market ahead of the 2008 financial crisis, cautioned that Bitcoin’s recent dive may evolve into a “death spiral.”
Market analysts from Bitfinex believe that the range between $60,000 and $74,000 will be crucial in determining Bitcoin’s trajectory, serving as a potential battleground for a recovery or further decline. The ideal conditions for this downturn were dubbed a “perfect storm” by Ken Mahoney, CEO of Mahoney Asset Management.
Furthermore, the Japanese yen carry trade has been flagged as a “ticking time bomb,” now at risk of unwinding. This trade has historically been associated with Bitcoin sell-offs, as it involves borrowing yen at low interest rates to invest in high-yield assets like cryptocurrencies.
On the regulatory front, Trump’s recent announcement of Kevin Warsh as his pick to lead the Federal Reserve has also stirred anxiety among investors. Warsh’s past concerns about inflation imply a likelihood of interest rate hikes, conflicting with Trump’s previous push for lower rates.
Despite Bitcoin’s difficulties, some observers remain optimistic. Proponents argue that the recent losses are simply profit-taking after substantial rallies in 2022. Stephen Pair, co-founder and CEO of BitPay, suggested that this pullback might be a normal adjustment for a maturing asset class.
Nonetheless, frustration within the crypto community is palpable, particularly pertaining to the stagnation of federal legislation meant to establish guidelines for digital assets. There’s also dissatisfaction regarding the government’s lack of involvement in acquiring Bitcoin at scale, despite earlier promises related to a Strategic Bitcoin Reserve and regulatory relief.
