Bitcoin crash forewarned by analysts citing sustained negative growth territory

Macro landscape holding Bitcoin in a consolidation range for over 90 days raised risks of the deeper correction.

Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.

Bitcoin (BTC) price movements reflected a period of consolidation before dropping below $90,000 after BTC failed to break above its all-time high in February. According to the latest edition of the “Bitfinex Alpha” report, macroeconomic uncertainty worsens this scenario.

Over the past week, Bitcoin fluctuated within a 6.5% range, peaking at $99,574 on Feb. 21 before closing at $96,346. Since it has dropped a further 7.5% to $88,600 as of press time. 

Two significant events exacerbated the market downturn: a hack involving crypto exchange Bybit and a sharp decline following the expiration of S&P 500 options. The latter resulted in a 4.7% drop that temporarily pushed Bitcoin below $95,000 before recovering.

As of Feb. 22, Bitcoin had declined 5.9% from its recent peak and now sits down 19% despite a 48.4% surge in November 2024. Ethereum (ETH) and Solana (SOL), which also saw substantial gains in late 2024, have retreated 16.9% and 33.1%, respectively. 

Memecoins, which tend to experience extreme volatility, declined 37.4% after recording a 90.2% rally in December 2024. They have since fallen an average of 12% across the board over the past 12 hours.

The contraction is not isolated to digital assets. The broader financial market has also struggled, particularly the S&P 500, which had difficulty sustaining a rally above the 6,000 level and now sits at 5950 in pre-market.

A 2.1% drop in equities on Feb. 21 mirrored the downward pressure across risk assets, including crypto. Feb. 24 saw it fall even further. The correlation between crypto and traditional markets remains a defining factor, with investors responding to broader macroeconomic signals.

Institutional demand and ETF flows

Bitcoin exchange-traded funds (ETFs) have seen a marked slowdown in inflows, indicating reduced institutional interest. US-based Bitcoin ETF purchases have dropped from daily acquisitions of 4,000–5,000 BTC in November to less than 1,000 BTC per day over the past week. 

Additionally, ETF outflows peaked at $360 million on Feb. 20, reflecting a decline in bullish sentiment.

Despite this, buy-side activity showed resilience at lower price levels, with Bitcoin ETFs contributing over 8% of global spot trading volume on Feb. 21. 

However, Ethereum ETF participation remains weak, with net flows hovering near zero in certain funds. The muted demand from institutional investors suggests hesitation regarding crypto exposure in the current market environment.

A broader reduction in capital inflows is evident within the perpetual futures market, where open interest (OI) across major assets has fallen significantly. Over 30 days, Bitcoin’s OI decreased by 11.1%, while Ethereum and Solana saw declines of 23.8% and 6.2%, respectively.

Memecoins experienced the steepest drop, with a 52.1% reduction in OI, highlighting their reliance on speculative trading.

The decline in leveraged positions suggests traders are scaling back exposure amid weakening momentum and heightened uncertainty. 

The report noted that the sharpest retracement in OI is observed in assets with higher volatility, reinforcing the risk-averse sentiment among market participants.

Potential for further decrease and negative sentiment

Before last night’s crash, Julio Moreno, head of research at CryptoQuant, highlighted on-chain data indicating that Bitcoin demand is in negative growth territory. This is the first time BTC has entered this area since September.

This condition makes it harder for BTC to rally, increasing the risks of a deeper correction, which is starting to play out.

Furthermore, this increased the negative sentiment among investors. As Milk Road shared on X, although Bitcoin is 14% shy of its previous all-time high at $109,354 as of press time, the crypto market sentiment is mirroring levels seen in August 2024. 

That month, Bitcoin was priced at around $55,000 and crashed massively following the Yen carry-trade incident.

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