As the world grapples with economic uncertainty, Bitcoin has experienced a significant pullback, with the cryptocurrency trading around $81,600, a 25% dip from its January peak of $109,000, according to CoinGecko. The tightening liquidity conditions and intensifying selling pressure are key contributors to this downward trend. Vincent Liu, Chief Investment Officer at Kronos Research, notes that “daily tariff swings and ongoing ETF outflows are keeping risk assets under pressure.”
Bitcoin’s recent drop below $92,000, as reported by Glassnode, represents a pivotal turning point in the market. This milestone corresponds with the Short-Term Holder cost basis, a critical support line, which, when breached, often signifies a change in market sentiment. The current drawdown is distinguished by a notable absence of aggressive dip-buying, a trend often seen during previous pullbacks. Instead, investors are adopting a more cautious stance.
External risks, including the Bybit hack and escalating U.S. tariff disputes, have caused a shift in investor behavior, with capital preservation taking precedence over opportunistic buying. Furthermore, the broader macro backdrop, with issues like inflation concerns and U.S. Federal Reserve hawkishness, continues to exert pressure on traditional markets.
However, a surprising policy shift from Washington is bringing a glimmer of hope to crypto investors. During a closed-door roundtable, White House official Bo Hines indicated the Trump administration’s intent to significantly expand their Bitcoin holdings. This move aligns with the government’s recent Bitcoin reserve announcement and reaffirms their commitment to the cryptocurrency.
In a related development, Senator Cynthia Lummis is reintroducing the Bitcoin Act, a bill that, if passed, would mandate the U.S. government to acquire up to one million BTC, equivalent to nearly $80 billion at current prices. Despite uncertainties about execution, the White House has expressed support for this initiative.
If the U.S. government proceeds with these large-scale Bitcoin purchases, supply constraints could emerge, potentially acting as a catalyst for future price appreciation. Alexia Theodorou, Kraken’s head of derivatives, observes, “Bitcoin’s futures remain in contango, suggesting relative strength in Bitcoin amid broader market uncertainty.”
However, without renewed buying interest, there is a possibility of Bitcoin entering a phase of prolonged consolidation or even a deeper correction before achieving stability. Marco Lim, managing director at Solowin Holdings and founding partner of MaiCapital, articulates the broader concerns, stating, “Whether the two priced-in potential rate cuts will happen this year is a major macro concern.”
While the Trump administration’s impact on crypto seems to have already been priced in, it remains to be seen how these developments will shape the Bitcoin market in the long term.
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