Digital assets faced significant pressure on Tuesday as bearish sentiment weighed heavily, causing major cryptocurrencies Bitcoin and Ethereum to resume their declines after a relatively calm start to the week. As of the latest update, Bitcoin was down over 1% to $69,160, after earlier falling as much as 2.4% to $68,666. Ethereum dropped more than 4% to $2,018, having fallen over 5% during the session to a low of $1,997.
Bitcoin has just endured a particularly brutal week, erasing all gains made since former President Donald Trump won the U.S. presidential election in late 2024. While a new administration perceived as crypto-friendly was widely expected to benefit the industry, Bitcoin recently logged its longest monthly losing streak since 2018. Notably, Ethereum has experienced steeper declines than Bitcoin since last October's sharp drop.
According to Rachel Lucas, an analyst at BTC Markets, "Ethereum remains in a bearish structure overall after breaking below the $2,800 to $3,000 range." She added that the current sell-off stems from macro-level risk aversion and broader cryptocurrency market liquidation.
Bitcoin hovered near $70,000 over the weekend and into Monday. Last Friday, it briefly fell to around $60,000 before rebounding. Despite the recovery from last week's lows, risk appetite for the two major cryptocurrencies remains limited.
The Bitcoin derivatives market continues to flash bearish signals. The funding rate for Bitcoin perpetual contracts remains below zero, indicating traders are either positioning for further price declines or demanding compensation to hold long positions. Simultaneously, open interest for Bitcoin perpetual contracts has failed to recover from its decline since last October, highlighting weak conviction behind the recent rebound. Data from Coinglass shows current open interest is down approximately 51% from its October peak. Even as Bitcoin rebounded from around $60,000 to $70,000, open interest showed no signs of increasing.
Andy Martinez, CEO of Crypto Insights Group, noted that market liquidity and depth have significantly diminished since the sharp decline on October 10th last year, prompting investors to reduce leverage and adopt more conservative trading strategies. "The market is still digesting everything that happened after October 10th," he said.
The options market is also sending cautious signals. Bitcoin's implied volatility has retreated sharply from about 83% last Thursday to around 60% currently, indicating reduced expectations for near-term large price swings. However, positioning remains defensive. Griffin Arden, Head of Research & Options Trading at BloFin, pointed out that the 25-delta call/put skew remains significantly tilted towards put options, reflecting strong ongoing investor demand for downside protection.
Arden stated that the diminished impact of leverage on prices helps reduce volatility and stabilize prices, but it also suggests many investors are choosing to take profits or cut losses at lower levels, moving to the sidelines or even exiting the market temporarily. In his view, a market environment dominated by bearish sentiment is more likely to lead to consolidation rather than a rapid rebound.
Furthermore, since the sharp decline in early October last year, both cryptocurrencies' exchange-traded funds (ETFs) have seen outflows totaling billions of dollars. Investors have withdrawn $3.2 billion from Ethereum ETFs, including $462 million this year alone. Meanwhile, Bitcoin ETFs have seen outflows of $7.9 billion over the same period, with $1.8 billion exiting this year.
The current deep correction in Bitcoin has prompted warnings from some market participants. Carmelo Aleman, a trader and analyst at CryptoQuant, pessimistically stated that Bitcoin has entered a bear market. He cautioned that Bitcoin's spot and futures trading patterns are now clearly "bearish," with the market in a "capitulation" phase where most participants will incur losses.
Michael Burry, famed for shorting the U.S. housing market before the 2008 financial crisis, warned that Bitcoin's plunge could further evolve into a self-reinforcing "death spiral," causing lasting damage to companies that aggressively accumulated the cryptocurrency over the past year. In a blog post last week, he stated that Bitcoin's nature has been exposed as a purely speculative asset, failing to act as a hedge against currency debasement like precious metals. He suggested that if Bitcoin continues to fall, it could quickly impair the balance sheets of major holders, forcing selling across the crypto ecosystem and triggering large-scale value destruction.
Richard Farr, Chief Market Strategist and Partner at Pivotus Partners, issued an extremely pessimistic forecast for Bitcoin, setting a price target of zero. Farr stated, "Our price target for Bitcoin is zero. This is not for sensational effect but is a result derived mathematically."
Despite the lingering pessimism in the crypto market, Bernstein analyst Gautam Chugani is undeterred by so-called "crypto winter" narratives. He expects Bitcoin to reach a new all-time high, targeting $150,000 by year-end. In a report, he said, "The current Bitcoin price action is merely a crisis of confidence. No major problem has occurred, and no scandal will be exposed. In the age of AI, Bitcoin and cryptocurrencies have become less prominent. The bearish narrative for Bitcoin is the weakest in history."