Bitcoin’s bullish momentum cooled off significantly on Monday, with BTC falling below the critical 200-day Exponential Moving Average (EMA). The dip has drawn attention from crypto experts and market analysts, many of whom suggest that Bitcoin could be entering a consolidation phase lasting several months. Here’s a closer look at the factors influencing this movement and what may lie ahead.
Understanding Bitcoin’s Recent Price Movement
Bitcoin recently erased nearly all gains recorded since November 10, hitting a low of $78,372. This downward trend reflects shifting investor sentiment and a complex interplay of market forces. Three major drivers appear to be behind the decline: macroeconomic developments, statements from former U.S. President Donald Trump regarding tariffs, and a noticeable slowdown in institutional investor demand alongside weaker U.S. stock performance.
Breaking below the 200-day EMA at $85,722 was a significant technical event. Two other momentum indicators—the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD)—also flashed signals of potential further decline. The RSI trended downward on the daily chart, while the MACD displayed red histogram bars below the neutral line, indicating negative momentum.
Key Factors Behind the Bitcoin Price Drop
1. Reduced Institutional Demand
The 2024 Bitcoin bull run was largely ignited by the approval of U.S. spot-based Bitcoin Exchange Traded Funds (ETFs). This development helped propel BTC to new all-time highs and encouraged numerous institutions to add Bitcoin to their treasuries and balance sheets. Recently, however, institutional investors have started pulling back due to increased market volatility and a shift toward risk-off sentiment.
Data from Farside Investors highlights a consistent pattern of net outflows from Bitcoin ETFs over the past two weeks. These outflows suggest weakening interest from large-scale investors, adding to the current bearish outlook for Bitcoin.
2. Influence of the Options Market
A recent Bitfinex Alpha report emphasized the role of options trading in amplifying Bitcoin’s price volatility. According to the analysis, Bitcoin has entered a new volatile price range between $85,000 and $92,000.
Traders in the options market contributed to price instability, particularly around the expiration of $3 billion in Bitcoin and Ethereum contracts last Friday. The report notes:
“Options realized volatility surged to over 80%, reflecting how traders’ reactions to shifting macroeconomic conditions fueled instability. Implied volatility jumped 35.7% ahead of the summit as participants hedged their positions.
Despite this, on-chain data shows that many traders faced significant losses last week, with realized losses reaching $818 million in a single day. The events of February 28 and March 4 ranked among the highest daily loss events this cycle. Widespread capitulation often precedes market stabilization, though geopolitical and macroeconomic concerns remain a substantial overhang.”
3. Correlation with Traditional Markets
Bitcoin’s correlation with traditional markets—especially U.S. equities—has played a crucial role in its recent performance. According to Ruslan Lienkha, Market Lead at YouHodler, Bitcoin and American stocks have shown closely aligned price trends over the medium to long term.
Lienkha told FXStreet:
“If the stock market undergoes a major correction or decline, it’s unlikely the crypto market will thrive. While Bitcoin has the potential to become a hedge asset in the future, investors currently treat it as a high-risk asset, often reacting more strongly to broader market sentiment than traditional financial markets.
Rising demand for short-term put options on BTC, ETH, and SOL reflects a defensive market posture. How does this align with broader risk appetite in traditional and digital assets?
The U.S. bond market is signaling risk-off sentiment, which is contributing to selling pressure in equities and other asset classes—including cryptocurrencies. Investor uncertainty has risen markedly over the past week. Typically during such periods, we see increased interest in options trading as participants use these instruments to hedge risks associated with spot market exposure.”
What Could Drive a Sustained Bitcoin Recovery?
According to Lienkha, positive economic data and signs of easing inflation could renew expectations for gradual monetary loosening—a development that might encourage capital flow into financial markets, including cryptocurrencies.
He added:
“Favorable inflation and economic reports could strengthen beliefs in a controlled shift toward monetary easing, which may support crypto prices.
News regarding strategic reserves could offer short-term price support. However, sustained crypto purchases are necessary for meaningful long-term impact. The key issue is that the U.S. government hasn’t clarified any specific plans for Bitcoin acquisition. Overall, internal market factors remain strong, but macroeconomic conditions continue to dominate across all financial markets.”
For those looking to 👉 track real-time market updates, understanding these dynamics is essential in navigating volatility.
Frequently Asked Questions
Why did Bitcoin drop below $80,000?
Bitcoin’s decline resulted from several factors, including reduced institutional interest, elevated volatility from options expiries, and a strong correlation with downward-moving U.S. equities.
What is the significance of the 200-day EMA?
The 200-day Exponential Moving Average is a key technical indicator used by traders to assess long-term market trends. Breaking below it often signals weakening momentum and potential further declines.
Are institutional investors still buying Bitcoin?
Recent data shows net outflows from Bitcoin ETFs, indicating that some institutional players are reducing exposure amid current market uncertainty.
How do options affect Bitcoin’s price?
Large options expiries can increase market volatility as traders adjust or hedge their positions, often leading to short-term price swings.
Can Bitcoin decouple from traditional markets?
While many hope Bitcoin will act as an uncorrelated asset, it currently often moves in tandem with traditional risk assets like tech stocks, especially during periods of macroeconomic stress.
What could help Bitcoin recover?
A combination of positive macroeconomic data, renewed institutional inflows, and clearer regulatory frameworks could help restore confidence and support price recovery.