GuShiio.com Arthur Hayes believes that Bitcoin may fall to $70,000.
Compiled by: Deng Tong, Golden Finance
Several specific factors have contributed to the latest decline in cryptocurrency prices, including:
- The U.S. stock market is difficult to get rid of the recent downturn, and Deepseek is still fermenting the market shock.
- The cryptocurrency market is still recovering from the $1.4 billion Bybit exchange hack.
- As cryptocurrency investment products continue to flow out, investors are in safe-haven mode.
- Strong upward resistance has curbed efforts to recover global cryptocurrency market values.
US stocks drag down the crypto market
After last week’s sharp decline, major U.S. stock indexes failed in their attempts to rebound on Monday afternoon, with the Nasdaq closing down 1.2% and the S & P 500 down 0.5%.
On February 21, local time, Trump signed the “U.S. Priority Investment Policy” memorandum. In terms of U.S. foreign investment, the memorandum attempts to strengthen the review of U.S. investment in China. Affected by this, China Stock Exchange fell sharply. The decline in the Nasdaq China Golden Dragon Index widened to 5.24%, and the Wande China Technology Leading Index fell more than 6%. Hot Chinese stocks fell sharply across the board. Alibaba and Beili fell more than 9%, while Jingdong and Tencent Holdings fell more than 7%.
In addition, Nvidia’s earnings report is causing concerns. On Wednesday, Nvidia will release its fourth-quarter results. MarketWatch noted last week that this earnings report will showcase its new Blackwell chip architecture in more detail. Production has accelerated, but the products are facing shortages, delays and overheating that are said to have prompted some large customers to delay orders. These issues have raised concerns about Nvidia’s short-term financial health. These concerns arise as investors assess the growth slowdown that companies and other large technology companies deeply involved in AI may face-often companies that are betting on artificial intelligence by investing billions of dollars and buying large quantities of Nvidia chips. Analysts at Bank of America Securities said in a report this month that Nvidia’s earnings will be “the next important test for the AI bull market,” adding that Nvidia’s earnings per share “are still weighty enough even without too much gimmick.”
Speaking of the U.S. economy, Neil Dutta, head of economic research at Renaissance Macro Research, said risks to the labor market are increasing. Real income growth is slowing, the housing market is deteriorating, and state and local governments are cutting back on spending. What is worrying is that the market generally believes that the economy will not slow down, with the median GDP forecast at around 2.5%.
“If 2023 is an unexpected increase, 2025 is more likely to see an unexpected decline,” Dutta wrote.
“Passive tightening of monetary policy is the main risk, which has important implications for financial market investors,” Dutta continued. “I expect long-term interest rates to fall and stock prices to fall as risk appetite wanes. In terms of the economy, job market conditions are expected to deteriorate.”
Ethereum leads the market to plummet
Today’s decline in the cryptocurrency market is part of a correction that began on February 21, when the Bybit cryptocurrency exchange was hacked and lost more than $1.4 billion worth of ETH and ETH-related tokens, the largest cryptocurrency theft in history.
On February 25, the sell-off continued, including:
- Ethereum led the market down, falling 11.5% in the past 24 hours to trade at $2,503.26.
- Bitcoin and Solana also fell, with Bitcoin down 4.9% to $91,549.81;Solana down 15.7% to $141.76.
- Other cryptocurrencies such as XRP fell 10.8%; dogcoin fell 13.7%; and BNB fell 6.5%.
Massive liquidations in the derivatives market have compounded the problem.
The sell-off triggered the liquidation of leveraged positions. As of press time, a total of 316,393 traders had been liquidated in the past 24 hours, bringing the total liquidation to US$952.08 million.
The dominance of long liquidations suggests that the cryptocurrency market is over-leveraged in terms of bullish terms.
Despite the current bearish market sentiment, cryptocurrency options trading platform QCP Capital said that cryptocurrency prices and implied volatility have shown a moderate response compared to the 2022 FTX crash.
QCP Capital said in a Telegram message that this “highlights the growing maturity of the cryptocurrency landscape,” adding:
“Bybit’s ability to quickly obtain bridge loans to fill the liquidity gap during critical periods highlights the resilience and sufficient liquidity in the lending sector. The industry has steadily recovered since 2022 and experienced a sharp surge before last year’s U.S. presidential election.”
Investors continue to avoid cryptocurrency risks
The continued adjustment of the cryptocurrency market is consistent with capital outflows from cryptocurrency investment products.
Key points:
- Digital asset investment products experienced capital outflows for the second consecutive week;
- According to CoinShares, total outflows were US$508 million for the week ended February 21.
- This suggests that institutional investors have reduced their investment in digital assets.
- Bitcoin was the largest outflow of funds, totaling US$571 million.
- Inflows so far this year fell to $6.6 billion last week from $7.4 billion two weeks ago.
Capital flows for crypto investment products. Source: CoinShares
James Butterfill, director of research at CoinShares, attributed this to uncertainty about trade tariffs, monetary policy and inflation. He said:
“We believe investors are staying cautious in the wake of the inauguration of the U.S. president and the ensuing uncertainty about trade tariffs, inflation and monetary policy.”
Meanwhile, market participants are waiting for the last U.S. inflation data this week.
What you need to know:
- The personal consumption expenditure (PCE) index is the Federal Reserve’s “preferred” inflation indicator and will be released on February 28.
- Last week, initial jobless claims exceeded the median forecast of 4,000 to 219,000, indicating that labor market conditions are weakening.
- This has greatly reduced expectations of multiple interest rate cuts in 2025.
The Federal Reserve's target interest rate probability at the FOMC meeting on July 30. Source: Zhishang Institute
The odds that the Fed will keep interest rates unchanged at its next two meetings are currently 97.5% in March and 73% in May.
The cryptocurrency market faces huge upward resistance
Today’s decline in the market value (in aggregate) of all cryptocurrencies is part of a correction that began on January 31, with key support areas turning to resistance.
Key points:
- TOTAL is trading below the key supply area between $3.28 trillion and $3.31 trillion, which is the 50-day and 100-day simple moving averages (SMA).
- The Relative Strength Index (RSI) is currently at 40, indicating that market conditions are still favorable for the downside.
- In addition, the sell-off could cause the cryptocurrency market to fall towards the support level of US$3.03 trillion.
- Please note that this has been a key support area for TOTAL since November 20.
- Breaking through this level would trigger a sell-off towards the 200th SMA of US$2.72 trillion.
TOTAL/USD daily chart. Source: Cointelegraph/TradingView
Instead, pushing the market value of cryptocurrencies higher could bring them back to $3.2 trillion or higher to test the resistance level mentioned above.
According to well-known analyst Crypto Zone,”the cryptocurrency market is in a neutral period,” with a fear and greed index of 40.”
The analyst added: “This suggests that investors are carefully weighing their actions and this is a critical moment for strategic decision-making.”
BTC bearish to $70,000
BitMEX co-founder Arthur Hayes posted on social media that many IBIT holders are hedge funds that earn higher yields than short-term U.S. Treasury bonds by long ETFs and short CME futures. If the decline in BTC prices causes the basis (the gap between ETF prices and futures prices) to narrow, then these funds will sell IBIT and cover CME futures. These funds are currently profitable and will close their positions during U.S. trading hours to cash in on profits, given that the basis is close to U.S. Treasury yields. I think it dropped to $70,000.
Quinn Thompson, founder of Lekker Capital, a crypto hedge fund that specializes in trading using macroeconomic data, posted on social media: “I try to send the message to those who may be complacent/denials: $95,000 is still not a bad exit price compared to what I think we can trade in 6-12 months.」
Thompson believes there is an 80% chance that Bitcoin will not hit a new high in the next three months and a 51% chance that it will not hit a new high in the next 12 months.
Sources: Xinhuanet, Sina Finance, Securities Times, Wall Street News, Coindesk, CoinTelegraph, Twitter, etc.
