Introduction

The cryptocurrency market is in turmoil. Yesterday, March 9, Bitcoin – the bellwether of the crypto world – plunged 7% and the price retreated from its highs, triggering widespread panic in the market. According to The Block, the centralized exchange (CEX) spot market turnover reached $1.77 trillion in February, a new low for the year, but down 23.7% from $2.32 trillion in January, indicating a significant contraction in market activity. Meanwhile, crypto analyst Miles Deutscher noted on social media that only 12 of the top 100 crypto tokens by market capitalization have achieved positive returns over the past 90 days. FOR EXAMPLE, BERA SOARED 579.63% AND TRUMP ROSE 85.61%, WHILE BITCOIN FELL 13.47% AND LINK FELL 40%. This sharp divergence, combined with a decline in trading volumes, paints a picture of extreme panic in the market. So, does this mean that a bear market has quietly arrived?

Market Sentiment & Fear Index

Market sentiment is one of the important indicators to determine the trend, and the liquidation data, as a direct reflection of market sentiment, provides a key supplement to this analysis. At present, the Fear & Greed Index has fallen to 35, which is in the “fear” territory, a sharp decline from 70 (“extreme greed”) a month ago, which combines factors such as volatility (25%), market volume (25%), social media sentiment (15%), questionnaires (15%), bitcoin dominance (10%) and trend (10%), which clearly reflects the rapid deterioration of investor confidence. This trend is further confirmed by Glassnode’s Net Unrealized Profit/Loss (NUPL) indicator, which has fallen from 0.6 (high greed) to 0.2, which is close to the level at the beginning of historical bear markets, and is usually below 0 to mark a capitulation phase in the market, with current readings suggesting that panic is approaching a tipping point, although the market has not yet completely collapsed.

!

CryptoQuant data shows that demand growth in the bitcoin spot market is slowing, and the proportion of short positions in open interest in the futures market (Open Interest) has risen significantly, with short positions in CME bitcoin futures accounting for 45% of total open interest as of March 9, up 15 percentage points from 30% in early February The psychological threshold of 10,000 dollars.

The liquidation data further reveals the market dynamics, in the past 1 hour, the amount of BTC liquidation reached $4.7072 million, ETH was $1.3061 million, and the total amount was $11.5482 million, of which the long liquidated $8.2925 million and the short liquidated $24.3301 million. In the past 24 hours, the total liquidation amount reached $616 million, with long liquidation of $540 million and short liquidation of $76.3075 million.

!

Technical Analysis: Key Support and Resistance

From a technical point of view, the price of Bitcoin is at a critical juncture. After the end of the high swing from November 20, 2024 to February 24, 2025, the price forms a potential double top pattern – a typical bearish signal. After the double top neckline broke down, the price retreated from the highest point of $82,000 to around $76,000, and the volatility is close to the expected target (about 10%), but it has not been fully digested in the time dimension.

!

Analysts generally agree that the market could face two paths:

· Path 1: Time for Space If $78,000 becomes the bottom, the bulls and bears need to wait patiently for two or three months to confirm the trend. Currently, the range between the 50-day moving average (about $77,500) and the 200-day moving average (about $72,000) is the focus of the short-term game. If the price can hold at $78,000, a W bottom pattern could form, setting the stage for a subsequent rally.

· Path 2: Further downside If the bears prevail, the price could fall to the left-hand trading zone of $70,000-$72,000. This area is not only a support level for the 200-day EMA, but also an important retracement level after the rebound from the August 2024 lows. Trader Eugene Ng Ah Sio said in a Telegram group: “I’m not in a hurry to participate in auction trading at the current price, $75,000 is the only level I’m interested in.” This cautious approach reflects uncertainty in the market.

In addition, the Relative Strength Index (RSI), currently at 42, has retreated from the overbought zone (above 70) to a neutral low level, suggesting that short-term selling pressure has eased, but it has not yet entered the oversold zone (below 30). Technical analysis advises investors to stay on the sidelines, avoid blindly chasing higher or bottoms, and wait for the trend to clear.

Macroeconomic backdrop: Tailwinds and uncertainties

The impact of macroeconomic factors on the cryptocurrency market cannot be ignored. First, changes in the global interest rate environment are weighing on riskier assets. The US 10-year Treasury yield recently rose to 4.2%, up 40 basis points from 3.8% at the start of the year, attracting capital from the crypto market to traditional safe-haven assets. At the same time, inflation expectations remain high and the Federal Reserve may delay rate cuts, further weakening Bitcoin’s appeal as “digital gold”.

At the legislative level, the weakening of positive news has also exacerbated market pressure. Take, for example, Utah’s Bitcoin bill, which passed the state Senate by a vote of 19 to 7 on March 7 and is about to be signed into law by the governor. However, its core provision – allowing Utah to hold Bitcoin as a reserve asset – was removed during final deliberations. The original clause would have authorized state Treasury secretaries to invest in bitcoin up to 5% of its market capitalization (about $25 billion), which would have made Utah the first U.S. state to have bitcoin reserves. Today, the bill only retains basic rights such as custody protection, bitcoin mining, and node operation, and its impact is greatly reduced.

The exhaustion of macro tailwinds has dampened market confidence, while external uncertainties, such as the Trump administration’s potential adjustments to crypto policy, are adding uncertainty to the market. Bloomberg analysts predict that if Trump is re-elected, his tax cuts and deregulation policies may boost the crypto market in the short term, but the long-term effect remains to be seen.

ETF outflows: Institutional enthusiasm wanes

!

Institutional demand was once a big driver of Bitcoin price increases in 2024, but recent outflows from spot ETFs are worrying. According to sosovalue data, since March, the net outflow of bitcoin spot ETFs in the United States has exceeded $500 million, of which the GBTC outflow of Grayscale is particularly significant. Julio Moreno, head of research at CryptoQuant, noted, “Bitcoin spot demand growth is contracting, and short positions in the futures market are dominant, which is directly contributing to the price decline.”

Jacob King, founder of WhaleWire, said more bluntly: “The Bitcoin bear market has arrived. Record ETF outflows, collapsing institutional demand narratives, and Bitcoin is heading for multi-year lows.” While this view is extreme, ETF outflows do reflect a waning institutional enthusiasm. ETF net inflows, which had averaged $200 million per day at the start of 2024, have now turned into net outflows, suggesting that institutional investors are reevaluating the risk-return ratio of crypto assets. This change is a further blow to market confidence.

On-chain data: Hope and uncertainty coexist

On-chain data provides a silver lining to the market. According to Glassnode’s analysis, the behavior of long-term holders (investors who hold positions for more than a year) is shifting from the distribution phase to the accumulation phase. As of March 9, the Net Position Change of long-term holders turned positive, with an average daily inflow of about 5,000 BTC. Historically, shifts in this trend have often been reliable signals for the market to move from the top to the bottom, such as the bottom-forming period in early 2019 and March 2020.

!

However, the current situation is different from previous cycles. First, price declines are likely to be slow and continuous, and relative bottoms are only likely to be reached when long-term holders reach new highs, such as more than 700,000 contracts. Second, the rise of spot ETFs has changed the structure of holders. According to Arkham Intelligence data, ETF holders currently control about 4% of the circulating supply of bitcoin (about 840,000 bitcoins), while the proportion of long-term holders on traditional chains has dropped to 60% from 65% in 2023. This can weaken the predictive power of traditional on-chain metrics.

While it is encouraging for long-term holders to switch to buy mode, it is still in the early stages of inflows, and the possibility of a reversal has not yet been ruled out. Market bottom predictions still need to be validated in conjunction with more external signals.

Historical Comparison: Similarities and Differences in Bear Markets

Historically, the current market has similarities to the bear markets of 2018 and 2022, but there are also significant differences. In 2018, Bitcoin fell by more than 80% from $20,000 to $3,200, accompanied by the bursting of the ICO bubble and shrinking trading volumes; In 2022, it fell from $69,000 to $16,000, a decrease of about 76%, affected by the collapse of FTX and interest rate hikes. Currently, Bitcoin is down about 7%-13% from its high of $82,000, which is far from the level of a historical bear market.

The similarities lie in declining trading volumes and market fragmentation. For example, in 2018, CEX turnover fell by 70% from its peak, compared to a current decline of only 23.7%. The difference is in institutional participation and the advent of ETFs, which provide a new buffer for the market. As a result, the current panic may be a correction rather than a full-blown bear market, but if ETF outflows continue to expand, the tragedy of history could be repeated.

The jury is still out on whether the market has entered a bear market. Technicals suggest that a pullback risk remains, with key support levels such as $78,000 and $75,000 being tested; At the macro level, the tailwinds are limited, ETF outflows are intensifying, and the institutional narrative is weakening; While on-chain data suggests a rebound in long-term holders’ confidence, the bottom is not yet clear. The current panic may be a precursor to a deeper adjustment, or it may be the darkness before dawn.

For investors, caution prevails. As Miles Deutscher puts it, “It’s a rotating market, and coin holders are being punished.” Instead of chasing short-term volatility, it is better to focus on the intersection of technical support, macro dynamics and on-chain signals. Drawing on Warren Buffett’s wisdom – “be greedy when others are fearful, fear when others are greedy” – risk management and a long-term perspective are the keys to survival in the turbulent waters of the crypto market.

Link to original article