Bitcoin has already has plunged more than 20% from its record high two months ago, but the fall may not be over yet, according to analysts.
The largest crypto (BTCUSD) traded at around $84,353 Friday afternoon, roughly 23% below its record high at $109,225 reached on Jan. 20, the day of President Donald Trump's inauguration, according to Dow Jones Market Data.
Concerns around Trump's tariff policies sent bitcoin to as low as under $80,000 on March 11, the lowest level since November. However, after the Federal Reserve's meeting on Wednesday, bitcoin bounced - rising over 5% to above $87,000 briefly, from below $83,000 - as traders cheered the Fed's decision to slow the pace of shrinking its balance sheet, a process known as quantitative tightening.
A slowdown in quantitative tightening may lead to increased liquidity and, in turn, benefit risk assets like cryptocurrencies, according to Shubh Varma, chief executive and co-founder at crypto research platform Hyblock Capital.
Options-market positioning for bitcoin also has normalized, with the so-called skew - or the difference in pricing or implied volatility between put options and call options - shifting toward calls, noted analysts at crypto trading firm QCP Capital.
It shows that traders are becoming more bullish after the Fed meeting, as call options are becoming more expensive or appearing in higher demand than put options. This stands in contrast to earlier in the week, the QCP analysts wrote in a Thursday note.
Put options give traders the right, but not the obligation, to sell an underlying security at a specified price within a set time frame, while call options give traders the right to buy such assets.
Still, bitcoin faces further downside risks as macroeconomic conditions remain unclear, according to Greg Magadini, director of derivatives at Amberdata. The options skew may soon shift in favor of puts again, he noted.
Fears around the uncertainty of Trump's tariff policies have been weighing on both stocks and crypto for the past few weeks, and it doesn't appear that such assets have found their bottom yet, Magadini said in a phone interview.
"The markets still need to understand how tariffs are going to affect global trade and global growth, and then we still need to see how tariffs are going to affect inflation and how rates will respond in reaction to that," he said.
Fed-funds futures were pricing in an 89.1% chance that the U.S. central bank will cut its key interest rate at least twice this year, according to the CME FedWatch Tool.
From a technical perspective, bitcoin may fall toward $70,000 before it resumes its rally, Magadini said. While a bear market is typically defined as a fall of at least 20% from an asset's peak, crypto proponents have been reluctant to apply that metric to less established sectors like digital assets.
A major factor has been the unpredictability of Trump's policy announcements, which "creates an environment where he could post something market-moving at any time. Crypto, as a reflexive asset class dependent on trend-following flows, is especially vulnerable in such a skittish environment," Sean Farrell, head of digital-asset strategy at Fundstrat, wrote in a Friday note.
In addition, CryptoQuant, a research firm that tracks blockchain data, said its Bull Score Index - which measures bullish metrics out of a total of 10 key indicators that track Bitcoin's network activity, investor behavior, demand and market liquidity - stands at 20, the lowest level since January 2023.
If the index remains below 40 for a prolonged period, it may indicate a continuation of bearish market conditions, according to analysts at CryptoQuant.
Bitcoin has historically only seen sustained major price rallies when the bull score is above 60, the analysts wrote in a Thursday note.
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