Bitcoin's valuation has plummeted to a nadir not witnessed since the inauguration of President Donald Trump. Should prediction markets prove accurate, the leading cryptocurrency globally may be poised for a significantly deeper descent.
Since reaching an unprecedented peak exceeding $126,000 in October, Bitcoin has relinquished 40% of its value, simultaneously losing its forward thrust, compelling narrative, and status as a reliable hedge asset.
Current contracts on Polymarket, a decentralized forecasting platform favored by crypto-native investors, now indicate an 82% probability that Bitcoin will decline to $65,000 within the year, representing a drop of approximately 13% from its current level of $73,200.
Some speculators are anticipating an even steeper downturn. The likelihood of Bitcoin finishing below $55,000 has surged to about 60%, whereas the odds of a rebound propelling it back to $100,000 have dwindled to 54%, a sharp decrease from 80% at the year's commencement.
This pessimistic outlook is even more pronounced in short-term contracts. A specific February market on Polymarket currently assigns a 72% chance that Bitcoin will trade under $70,000 by March 1st—a surge of over 35 percentage points since the month began. Approximately $1.7 million in wagers supports this outcome, mirroring the immediate pessimism among traders as ETF outflows and faltering macroeconomic correlations intensify skepticism throughout the sector.
"This fundamentally reflects the prevailing bearish sentiment in the markets," commented Ilan Solot of Marex, pointing to Bitcoin's recent failure to function as a safe-haven asset, among other contributing factors.
Sentiment in the cryptocurrency market has been severely depressed since early October, following an unexpected weekend crash that wiped out billions of dollars across various positions. In retrospect, this event marked a pivotal moment, as digital assets have struggled to regain their footing since. A renewed sell-off this past weekend has further dampened the mood. The total crypto market capitalization now hovers around $2.5 trillion, a stark decline from over $4 trillion in October.
"These declining markets are often exceptionally harsh on leveraged traders. The capital obliterated on October 10th far exceeded the losses from the previous downturn in November 2022," noted Dan Morehead, founder of Pantera Capital. "This inflicts significant financial pain, and many of those affected investors do not re-enter the market promptly—recovery takes time."
Inflows into cryptocurrency ETFs had provided a buoyant effect on prices last year, with tens of billions of dollars pouring into Bitcoin-specific funds. However, this supportive stream has since evaporated: data aggregated by Bloomberg indicates that crypto ETFs trading in the US have experienced net outflows approaching $4 billion over the last three months. Research from Glassnode and K33 suggests the average trader is now holding positions that are underwater.
"We have observed a significant deceleration in flows to US spot ETFs, which represent a major potential source of new capital for the ecosystem," wrote Citi's Alex Saunders in a recent analysis. "This absence of fresh demand occurred concurrently with long-term holders growing apprehensive about cyclical vulnerabilities in Bitcoin."
Nevertheless, the collective intelligence gleaned from prediction markets starkly contradicts the optimistic forecasts touted by Wall Street crypto enthusiasts regarding a digital token resurgence. For instance, money manager and fintech personality Tom Lee predicted in November that Bitcoin could rebound to between $150,000 and $200,000—a projection that has yet to materialize. While institutions like Standard Chartered Plc and Bernstein have revised their forecasts downward, they still anticipate a substantial rally, with both maintaining that Bitcoin could hit $150,000 by year's end.
Comments