Bitcoin's plunge below $60,000 last Friday capped its worst week since the Sam Bankman-Fried FTX exchange crash in 2022.
The current forces seem almost benign compared to those events, but that's precisely what's alarming analysts, who warn that the token's modest rebound could be short-lived as structural weaknesses are exposed.
Investors are fleeing Bitcoin ETFs, technical indicators have weakened, interest rate expectations have shifted, and while the current "crypto winter" is milder than previous ones, it could mean the worst is yet to come.
"I think the decline will continue," said Griffin Ardern, co-founder of multi-asset fund manager Primal Fund. "We're still quite a ways from the true bottom."
Bitcoin partially recovered from its 16% plunge in the seven days leading up to Sunday—its steepest weekly drop since the FTX bankruptcy triggered a 23% decline in November 2022. The drop below $60,000 sent the coin to its lowest level since October 2024, taking the price more than 50% below last year's all-time high above $126,000.
The selloff was partly due to Michael Saylor's Strategy Inc. selling a tiny portion of its Bitcoin, undermining the narrative that it would never sell. On Monday, the company reported buying 1,550 Bitcoin for approximately $101 million—far more than the $2.5 million it sold—but restoring market confidence may not be so easy.
Technical signals have weakened. Last week, Bitcoin fell below its 200-week moving average, a metric many traders use as a market support indicator. A break below this level could heighten caution, as it suggests the rally will be sold off rather than carried. Investors have already begun to hesitate, having pulled approximately $5.5 billion out of U.S. spot Bitcoin ETFs during 13 consecutive days of net outflows.
Paul Howard, senior director at crypto trading firm Wincent, described the current downturn as a "quiet bear market" because there has been no major FTX-style crash.
"A break below the 200-week moving average provides important confirmation that markets may have entered a bear market," he said, adding, given the heightened volatility, "This rally is unlikely to be sustainable." Shifting interest rate expectations is part of the problem, as the prospect of higher borrowing costs is driving capital away from speculative assets like cryptocurrencies. The unresolved war between the US and Iran and strong US employment data have led markets to shift from expecting a Fed rate cut to pricing in the possibility of a rate hike.
"This is a massive reversal in expectations," said Rajeev Sovni of Wave Digital Assets.
He added that Bitcoin has also lost its positive correlation with US stocks as money has flowed out of cryptocurrencies and into AI and tech companies.
The current correction is still milder than previous "crypto winters": Bitcoin has fallen about 50% from its peak, compared to declines of around 80% during previous bear markets. After its 2021 peak, it took Bitcoin over a year to bottom and another 15 months to regain its highs. Hayden Hughes, managing partner at Tokenize Capital, noted that companies like Strategy that hold cryptocurrency in their treasuries pose an "idiosyncratic risk to the crypto industry": they hold large amounts of crypto and could be forced to sell if financing conditions tighten or their stock prices fall.
There are also systemic risks that could weigh on equity markets and spill over to crypto. Bitcoin's decline may not be comparable to previous cycles, he said, but the word "for now" looms large.