Bitcoin Faces Sharp Decline, Testing Key Support Levels
In a worst-case scenario, Bitcoin’s price could tumble to the $72,000–$74,000 range, according to one analyst.
After an extended period of consolidation above $90,000, Bitcoin (BTC) has taken a bearish turn this week, triggering concerns among investors. The cryptocurrency has plunged by 12.6% in just the first three days of the week (per UTC hours), marking its steepest decline since the FTX collapse in November 2022, according to TradingView data.
The recent sell-off aligns with prior analyses by CoinDesk, which highlighted investor disappointment over the lack of progress from President Donald Trump’s administration in establishing the promised national BTC reserve. Additionally, tightening fiat liquidity conditions have further dampened market sentiment.
Institutional Weakness and Market Backwardation
Institutional demand for both Bitcoin and ether (ETH) has waned, bringing the CME futures market closer to backwardation—a condition where spot prices exceed futures prices. This shift signals diminishing confidence in the crypto market. Adding to Bitcoin’s struggles, the Nasdaq, a key Wall Street index, has also faced selling pressure, compounding the broader risk-off sentiment.
With Bitcoin now breaking down from its prolonged trading range, the key question is: what’s next? Market indicators suggest the downside could continue, particularly as trade tensions escalate ahead of the March 4 deadline for U.S. tariffs on Canada and Mexico. The initial round of tariffs introduced earlier this month already sparked widespread market unease.
Can Core PCE Data Provide Support?
Some investors are looking toward Friday’s U.S. “core” Personal Consumption Expenditures (PCE) index— the Federal Reserve’s preferred inflation measure—as a potential support factor for risk assets. However, Noelle Acheson, author of the Crypto is Macro Now newsletter, cautions against over-reliance on this data.
January’s core PCE is expected to show a year-on-year increase of 2.6%, down from December’s 2.8%, according to FactSet estimates. While lower inflation is typically associated with a higher probability of Fed rate cuts and risk-on sentiment, markets might focus instead on rising forward-looking inflation indicators.
For example, this week’s Conference Board consumer confidence report revealed a sharp jump in one-year inflation expectations from 5.2% to 6%. Similarly, two- and five-year inflation swaps have been trending higher. These developments could overshadow any relief from a softer-than-expected PCE reading.
“Even if PCE comes in below expectations, markets may interpret it as a sign of slowing economic growth, potentially triggering another wave of risk-off sentiment,” Acheson warned in Wednesday’s newsletter.
According to Acheson, the current market turbulence is largely macro-driven, with concerns over tariffs, lofty corporate valuations, and excessive AI-related investments weighing on sentiment. However, she remains optimistic about Bitcoin’s long-term appeal, emphasizing its dual role as both a risk asset and a digital safe haven.
“For most portfolios, Bitcoin’s risk-asset/safe-haven duality means that there is a price point where long-term investors will step in, which in turn could encourage traders to re-enter the market,” Acheson noted.
Key Support Levels and Demand Zones
Technical analysis suggests that Bitcoin’s breakdown from its $90,000–$110,000 range could lead to a decline toward $70,000.
“In a worst-case scenario, BTC could drop to the $72,000–$74,000 range, where a potential rebound may occur,” said Markus Thielen, founder of 10x Research, in a client note on Wednesday. He pointed to Bitcoin’s lagging correlation with global central bank liquidity as a key factor.
Despite the downturn, Bitcoin has rebounded to $86,000 at press time after testing a key demand zone around $82,000. Thielen identified this level using an on-chain metric called the short-term holders’ realized price—the average purchase price for Bitcoin held by addresses for less than 155 days.
“Historically, Bitcoin rarely stays below this level for extended periods in bull markets. However, during bearish phases, it tends to linger below this threshold for longer durations,” Thielen explained. He noted that during Bitcoin’s summer 2024 consolidation, the cryptocurrency fell $9,616 below this metric, currently positioned at $92,800.
“If the 2024 consolidation pattern repeats, Bitcoin could decline to around $82,000 before stabilizing,” he added.
Regulatory Clarity Could Unlock New Capital
While the market remains under pressure, some analysts believe regulatory developments could provide a much-needed boost. Wednesday’s Senate Committee hearing on “Exploring a Bipartisan Legislative Framework for Digital Assets” has raised hopes that clearer regulations could improve institutional sentiment.
“A well-defined regulatory framework could be exactly what the market needs to attract institutional capital,” said Matt Mena, crypto research strategist at 21Shares. “If the U.S. provides definitive guidelines on stablecoins and broader digital asset regulations, we could see a significant influx of institutional investment.”
As Bitcoin navigates this period of heightened volatility, its dual identity as both a speculative asset and a store of value could play a pivotal role in determining the next phase of its market cycle.
