Bitcoin Faces Sharp Decline as AI Tokens Outperform
Key Takeaways:
- Bitcoin’s (BTC) prolonged trading range above $90K has ended in a sharp downturn, dropping 12.6% in three days—the steepest decline since the FTX collapse in November 2022.
- Investor disappointment over stalled national BTC reserve plans and tightening liquidity conditions contributed to the sell-off.
- Institutional demand for BTC and ETH has weakened, pushing CME futures closer to backwardation.
- Broader macroeconomic concerns, including potential tariffs and inflation signals, are weighing on risk assets.
- Analysts identify $72,000–$74,000 as a worst-case support zone, with potential stabilization around $82,000.
- Regulatory clarity from recent Senate hearings could provide a catalyst for renewed institutional interest.
Bitcoin’s recent price action has left traders questioning the cryptocurrency’s next move. After weeks of trading above $90,000, BTC broke downward, with a 12.6% drop in just three days—its steepest decline since the FTX crash in 2022, according to TradingView data. This sell-off aligns with earlier analyses warning that lack of progress on President Donald Trump’s promised national BTC reserve, coupled with tightening liquidity, could spark downside pressure.
Adding to the bearish sentiment, institutional demand for BTC and ETH has waned, causing CME futures to inch toward backwardation—a condition where spot prices exceed futures prices. Simultaneously, Nasdaq’s decline has exacerbated the broader risk-off mood.
Looking Ahead: Further Downside Possible?
The outlook remains uncertain, with key macroeconomic factors influencing sentiment. Tariff concerns are back in focus as the March 4 deadline for Trump’s proposed trade measures against Canada and Mexico approaches. Analysts warn that renewed tariff-related fears could continue to pressure risk assets, including BTC.
Some traders had hoped that Friday’s core Personal Consumption Expenditures (PCE) index—a key inflation measure—would provide a relief rally. However, Noelle Acheson, author of the Crypto is Macro Now newsletter, cautions that markets may interpret a weaker PCE reading as a sign of economic fragility rather than a catalyst for risk-on sentiment. She points to rising consumer inflation expectations and inflation swaps as signals that markets remain wary of prolonged price pressures.
“So, this bad mood is largely macro-driven,” Acheson noted, citing concerns over tariffs, inflated corporate valuations, and AI-driven portfolio overexposure. However, she also emphasized Bitcoin’s dual nature as both a risk asset and a digital safe haven, suggesting that at a certain price level, long-term investors may begin accumulating BTC again.
Support Levels & Demand Zones
Technical analysis suggests that BTC’s breakdown from its $90K–$110K range could trigger further declines, potentially targeting $70,000. Markus Thielen, founder of 10x Research, identified the $72,000–$74,000 range as a critical support zone where a rebound could occur.
At press time, BTC had rebounded to $86,000 after briefly testing $82,000—a level Thielen highlighted as a potential demand zone based on short-term holders’ realized price data. Historically, BTC tends to trade above this level in bull markets, while in bear markets, it remains below for extended periods.
“If the 2024 consolidation pattern repeats, Bitcoin could decline to around $82,000 before stabilizing,” Thielen stated.
Regulatory Developments Could Shift Sentiment
Despite the market turmoil, some analysts see a silver lining in the form of regulatory progress. Wednesday’s Senate Committee hearing on “Exploring a Bipartisan Legislative Framework for Digital Assets” has renewed hopes for clearer guidelines around digital assets.
“A clear regulatory framework may be exactly what the market needs for institutions to confidently enter the space, unlocking the next wave of capital inflows,” said Matt Mena, crypto research strategist at 21Shares. He added that definitive guidance on stablecoins and broader digital asset regulations could drive significant institutional allocations into crypto.
While BTC remains under pressure, developments in regulatory clarity and macroeconomic shifts could set the stage for the next major price movement.
