Why is Bitcoin Dropping Again?

The global financial markets are in turmoil, and Bitcoin, long regarded as a safe haven by crypto enthusiasts, is no exception. After initiating a recovery, the leading cryptocurrency has abruptly fallen back into ‘extreme fear’ territory, prompting many questions. As long positions collapse and technical signals deteriorate, concern is growing among investors.

The Fall of Bitcoin and the Return of Fear

Bitcoin, once celebrated for its resilience against traditional market fluctuations, has recently shown worrying signs of weakness. On Monday, its price plunged to a low of $58,134, causing a drastic drop in the fear and greed index to 25 points, indicating a return to a state of ‘extreme fear’ among investors. This decline, although abrupt, is not an isolated event. It is part of a series of tremors that have seen Bitcoin lose nearly $10,000 in a few days, a drop largely attributed to the contagion from global stock markets.

This plunge comes after a week marked by intense volatility. Indeed, last week, Bitcoin had already fallen to $49,557 before quickly rebounding to regain the $60,000 threshold. This resurgence was fueled by the resilience of institutional investors, despite the absence of inflows into BlackRock’s exchange-traded fund (ETF), a confidence indicator often scrutinized by the market. However, this recovery was short-lived, as the bulls failed to maintain the momentum needed to stabilize the price above this critical psychological threshold.

Worrying Technical Signals and an Uncertain Outlook

As the Bitcoin market was attempting to stabilize, another blow darkened the outlook: the formation of a ‘death cross’, a dreaded technical indicator that occurs when the short-term moving average crosses below the long-term moving average. Often interpreted as a sign of an imminent bearish reversal, this indicator has reinforced the negative sentiment in the market. Although it does not guarantee an immediate decline, it remains a caution signal for investors already shaken by recent volatility. The lack of new bullish catalysts and the persistent pressure on global stock markets exacerbate this climate of uncertainty.

While the resilience of institutional investors offers a glimmer of hope, the market now seems dependent on the evolution of macroeconomic indicators and traditional stock markets. Only regained stability and clearer prospects will allow Bitcoin to break free from this spiral of fear and to regain a bullish momentum.