Bitcoin Faces Bearish Pressure as Prices Drop Below $90K

Date: February 27, 2025
Time: 1:06 PM UTC

Bitcoin (BTC) has experienced a significant downturn this week, marking a bearish end to its prolonged trading in the range above $90,000. This recent drop of approximately 12.6% in the first three days of the week is notable; it represents the largest decline since the collapse of the FTX exchange in November 2022, according to data from TradingView.

Market Dynamics and Investor Sentiment

The decline in Bitcoin’s value aligns with previous analyses from CoinDesk highlighting investor disappointment regarding the Trump administration’s slow progress on establishing a national Bitcoin reserve and tightening fiat liquidity conditions. Furthermore, institutional demand for Bitcoin and its next biggest competitor, Ether (ETH), appears to be cooling, pressuring the CME futures market closer to backwardation—a condition where the spot price of Bitcoin exceeds its futures price.

Amidst these developments, the Nasdaq index, known for its concentration of technology stocks, has also come under pressure, further compounding the difficulties facing Bitcoin and the broader cryptocurrency market.

The Risks Ahead

With the looming March 4 deadline for tariffs against Canada and Mexico, concerns are rising that the story surrounding Trump tariffs may escalate, potentially leading to a broader risk-off sentiment in the market. Analysts increasingly view the path of least resistance for Bitcoin as being downward.

Despite expectations surrounding the upcoming release of the U.S. "core" Personal Consumption Expenditures (PCE) index—an essential indicator of inflation—some analysts caution against over-optimism. Noelle Acheson, author of the "Crypto is Macro Now" newsletter, warns that a lower-than-expected core PCE could be interpreted as an indication of economic weakness rather than a justification for increased risk appetite.

The core PCE is projected to rise 2.6% year-on-year for January, a slight drop from December’s 2.8%, according to consensus estimates from FactSet. However, recent data indicating a surge in consumer confidence and inflation expectations may lead markets to overlook the softer reading.

Potential Price Levels and Market Support

Markus Thielen, founder of 10x Research, noted that technical analysis suggests a notable drop following the breakdown of Bitcoin’s prolonged range between $90,000 and $110,000. He anticipates the possibility of prices sliding to the $72,000–$74,000 range in a worst-case scenario, which could signify a level where a rebound might occur.

As of the latest data, Bitcoin has rebounded to approximately $86,000, having tested a demand zone around $82,000. Thielen had identified this level based on an on-chain metric—the short-term holders’ realized price, which indicates the average price paid by addresses holding Bitcoin for less than 155 days. Historically, Bitcoin rarely trades below this average during bullish conditions, whereas it tends to linger beneath it during bear markets.

Looking Ahead: Regulatory Developments

Despite the challenging landscape, some analysts remain hopeful about the future of Bitcoin and the cryptocurrency market. Regulatory clarity from upcoming legislative discussions in the U.S. could play a pivotal role in rejuvenating market valuations. According to Matt Mena, a crypto research strategist at 21Shares, a well-defined regulatory framework might unlock essential capital inflows into the space, encouraging institutional investment.

While current sentiment remains cautious, the potential for recovery in Bitcoin’s valuation hinges on a combination of macroeconomic factors, regulatory developments, and the intrinsic appeal of cryptocurrencies as both risk assets and safe-haven investments.

As the market navigates this turbulence, all eyes will be on forthcoming economic reports and regulatory announcements that could shape the trajectory of Bitcoin and the wider cryptocurrency ecosystem in the weeks to come.