Crypto Market Cap Drops To $2.85 Trillion As Crypto Markets Lose Over $500 Billion In The Last Week Bitcoin, the original cryptocurrency, has plummeted to a 4-month low of $82,200, down nearly 14% in a week. The abrupt price decline is causing record liquidations, with $770 billion erased in the past day.
The Bitcoin Fear and Greed Index has dropped to 10, a reading not seen since June 2022, when it indicated extreme fear. Historically, such sentiment has represented great buying opportunities for long-term investors.
Several elements have contributed to Bitcoin’s recent sell-off:
1. Spot Bitcoin ETF Outflows Continue
U.S. Spot Bitcoin ETFs have witnessed significant outflows for the seventh consecutive day, totaling nearly $2.99 billion in the past week. BlackRock’s IBIT experienced its largest single-day withdrawal since launch, adding to selling pressure. Recent data from SoSoValue indicates that 12 spot Bitcoin ETFs saw $754.53 million in net outflows on Feb. 26, compounding the bearish sentiment.
2. Bearish Technical Signals
Bitcoin has broken out of its long-term channel, flashing bearish divergence against the Relative Strength Index (RSI) on the weekly chart. The last time BTC exhibited this pattern, a prolonged bear market followed. Additionally, traders’ realized loss margin is at -8.25%, nearing the historical buy zone of -12%.
3. Trade War Fears Impacting Risk Assets
Important factors are geopolitical and macroeconomic. After former President Donald Trump's declaration of a 25% tariff on the European Union, the S&P 500 dipped $500 billion in market value. Bitcoin is considered a volatile asset and did not differ from this trend as it surpassed its slide below $84,000 for the first time since November 2023.
4. $5 Billion in Options Expiry on Feb. 28
A huge $5 billion worth of Bitcoin options are set to expire on Feb. 28, with $3.9 billion possibly set to expire worthless due to higher strike prices. That's likely to bring some extra market volatility as traders adjust their positions. At the same time, $1.3 billion in BTC has been transferred to exchanges, which could mean selling pressure.
In the aftermath of the decline, Bitcoin is now probing its 200-day moving average (DMA) While the RSI is dropping into oversold territory a configuration that in the past has preceded significant bounces back up.
Bullish Case:
If BTC can hold the support in the $82,000-$84,000 area, then short-term recovery toward $90,000-$92,000 could be seen. Recent history suggests that extreme levels of fear represent market bottoms and may result in renewed buying interest.
Bearish Case:
In case the selling pressure persists and Bitcoin breaks down below its 200-DMA support, then the next crucial level to watch would be in between $78,500-$80,000. Another dip under this zone might bring more accelerating downside momentum.
Source: TradingView
The recent plunge in Bitcoin prices reflects a confluence of macroeconomic fears, ETF redemptions, and technical fragility. There will be short-term volatility; however, long-term holders may well view this as an excellent potential buying opportunity. With important events such as the options expiry on Feb. 28th, traders should prepare for more market movement.
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