Bitcoin has slumped to its lowest level since April of last year, hitting nearly $74K.
The crypto market is currently suffering from panic among speculative participants, as futures open interest has declined severely and spot Bitcoin ETFs closed their third consecutive month with over $1B in outflows.
Furthermore, the risk-off mood prevailing across almost every sector of the broader financial market makes upward directional betting a highly precarious move.
At the same time, the anticipation of a critical set of US economic data and corporate earnings, combined with the fear of an all-out regional war in the Middle East, may be forcing traders to step aside.
These factors are reflected in a severe drop in total crypto market futures open interest, which fell to $109B, a 53% decline from its all-time high, according to CoinGlass. BTC futures open interest specifically slumped to $52B, representing a 44% decline from its peak.
This downturn coincided with the largest long liquidation wave since October 10th, with approximately $5B liquidated over the past six days, including roughly $1.7B in Bitcoin futures alone.
Meanwhile, high Japanese Government Bond (JGB) yields and the uncertainty surrounding the yen are making the accumulation of leveraged positions an even more dangerous play.
On the spot side, US Bitcoin exchange-traded funds (ETFs) recorded outflows of $1.49B last week, while also closing January with $1.61B in total outflows, according to SoSo Value.
Additionally, the on-balance volume (OBV) for Bitcoin on Coinbase has dropped to its lowest level since November 2024. A continuing decline in liquidity threatens to breach further defense lines, potentially clearing the path for a deeper bearish move.
Conversely, there may be light at the end of the tunnel, as “whales” appear to be moving in to buy at lower prices than those seen last week. Despite the severe drop in Bitcoin’s price, whale holdings did not fall; instead, they rose.
This is a notable divergence, as such a trend was not observed during other Bitcoin plunges over the last few months.
According to BGeometrics, the number of addresses holding between 1K and 10K BTC neared the November high of 1,958 as of Saturday.
Whales represent the last line of defense; if their support collapses, we may witness a further bearish move toward the $66K mark for Bitcoin.
In my opinion, what might restore market sentiment is the assurance that the new Federal Reserve chair nominee, Kevin Warsh, will favour lowering interest rates rather than maintaining a hawkish stance. It seems highly improbable, from my point of view, that Donald Trump would nominate a restrictive chairman while simultaneously advocating for lower rates.
