Cryptocurrencies declined on Thursday. This followed an unexpected sharp rebound the previous day, which had briefly led some investors to optimistically believe the market might be bottoming after a downturn lasting more than four months. During New York trading hours, Bitcoin fell as much as 3.5% to $66,511. On Wednesday, Bitcoin had climbed toward $70,000 for the first time since February 16, driven by a broad rally in risk assets. Bitcoin ETFs listed in the United States recorded net inflows exceeding $500 million on Wednesday, although they have still accumulated approximately $1.7 billion in net outflows year-to-date.
The cryptocurrency market continues to follow the sentiment of technology stocks. Shares of Nvidia fell due to market concerns about the sustainability of massive artificial intelligence spending, dropping over 5% on Thursday despite reporting strong earnings. Concurrently, traders are withdrawing from industry sectors perceived as potentially vulnerable to AI disruption.
Adam McCarthy, a Research Analyst at crypto data firm Kaiko, stated, "I'm not overly optimistic at the moment. In bear markets and periods of low liquidity, rebounds like this can be expected. As we've seen, this rally lacked sufficient support, so a pullback is not surprising."
Matt Hougan, Chief Investment Officer at Bitwise Asset Management, commented, "The end of a crypto winter doesn't conclude with excitement, but with indifference. A single day's surge is exciting, but no one expects Bitcoin to directly return to $100,000. Bitcoin is in a process of forming a base. This process will last for some time, be messy, and could even see lower lows."
Prominent crypto bull Tom Lee suggested that markets often bottom on "bad news," and the impact of Citrini Research's AI doomsday article hitting the market implies a bottoming area is forming. He believes the decline in the Mag 7 stocks is "about 95% complete," the sell-off in the software sector is "about 99% done," and the cryptocurrency pullback is in its "final few weeks."
Earlier this month, Bitcoin had erased all gains made since November 2024 when U.S. President Donald Trump secured re-election. The market had anticipated more crypto-friendly policies during Trump's second term, which helped push Bitcoin to a record high above $126,000 last October. However, a large-scale sell-off followed, keeping digital assets under pressure since.
American Bitcoin Corp., a mining company backed by the Trump family, which had a high-profile listing on Nasdaq during the crypto boom, is now deeply mired in the sector's most severe slump since 2022. The company reported a fourth-quarter loss of $59 million, and its market capitalization has nearly evaporated by 90%.
Analysis indicates that during this crypto winter, the underlying infrastructure has not collapsed. Despite the sell-off in Bitcoin, the foundational systems remain intact: exchanges are operating normally, custodians maintain sound solvency, institutional buyers are holding their ground, Bitcoin ETF assets are being held steadily, and the freely tradable supply has decreased. Analysts at Bernstein believe the current situation is merely a "crisis of confidence."
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