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Bitcoin investors find themselves navigating a tumultuous landscape as debates intensify over whether recent losses hint at deeper declines or a path to recovery.
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The market is currently witnessing extreme fear, reflected by dramatic sell-offs amounting to $1.7 billion, leading some analysts to suggest this could mark a significant market bottom.
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“Bitcoin has experienced one of the largest single-day losses in months; traders are bracing for critical price action,” warned Julio Moreno from CryptoQuant.
In the midst of crypto market volatility, analysts suggest that extreme fear may signal a turning point for Bitcoin as sentiment oscillates between panic and potential recovery.
Analysts Weigh Crypto Market Recovery
Julio Moreno, head of research at CryptoQuant, noted that on Wednesday, Bitcoin holders realized the largest single-day loss since August 2024, totaling a staggering $1.7 billion. This significant sell-off suggests widespread panic among traders, with many choosing to cut their losses as Bitcoin dipped below key support levels.
“Bitcoin holders realized today the largest loss since August 2024: $1.7 billion,” noted Moreno.
Meanwhile, market analyst Miles Deutscher highlighted that the Crypto Fear and Greed Index, a widely followed sentiment indicator, has plunged to its lowest since October 2024. In his opinion, however, extreme fear in the market could be a precursor to a price reversal, indicating that Bitcoin might be approaching a critical turning point.
“People are finally getting nervous again. Believe it or not, that’s exactly what we need to eventually form a bottom,” he explained.
In another observation, Deutscher pointed out that BTC exchange inflows hit their highest level of the year amid the recent market turmoil. This suggests that traders rushed to liquidate their holdings as Bitcoin dipped below the $90,000 mark.
However, he also speculated that such panic-driven selling could set the stage for an unexpected bounce, potentially catching those who sold off guard.
Mark Cullen, an analyst at AlphaBTC, weighed in on the situation, highlighting the role of market makers in stabilizing the price. According to Cullen, a Binance exchange market maker stepped in to prevent a deeper crash, recognizing that a further decline could trigger a widespread capitulation event.
“They know Bitcoin breaking any lower will cause a crypto market-wide crash and customers leaving with burnt fingers,” he stated.
Despite the intervention, Cullen remains cautious, suggesting that a temporary bounce may occur before the next leg down. While he does not expect an immediate crash, he did not rule out another drop to the $87,000 range to establish a higher low before a potential recovery.
M2 Money Supply Model Predicts Bitcoin Surge in March
Some analysts are eyeing March 2025 for a potential bullish turn. Colin Talks Crypto, a well-known crypto analyst, pointed to the strong correlation between Bitcoin’s price movements and the global M2 money supply.
His model suggests that Bitcoin’s price often reacts to changes in liquidity with a lag of approximately 46 days. According to the model, Bitcoin is expected to see a significant upward move around March 7, 2025, though this timeline could shift earlier based on recent trends.
The decreasing lag time between M2 movements and Bitcoin’s response suggests that increased global liquidity could soon boost BTC prices. While the correlation is imperfect, it has historically been a strong directional signal for Bitcoin’s price trends.
“It’s an uncanny correlation and it’s too close, in my opinion, to be coincidence,” the analyst quipped.
If the M2 Money Supply model holds, Bitcoin could be set for a recovery in early March. However, volatility remains the dominant theme in the short term, and traders should brace for potential bounces as macroeconomic factors influence institutional sentiment.
“… the price needs to recover above $96,000-$100,000, which will confirm the market’s readiness for new growth. If the pressure persists, the market may enter a phase of a deeper correction,” StealthEx CEO Maria Carola shared with COINOTAG.
Adding to the bearish pressure, Bitcoin ETFs have recorded substantial net outflows. As COINOTAG reported, Institutional investors, who played a major role in Bitcoin’s rally to new highs, appear to be pulling funds out of the market, raising concerns about further downside risk.
“This process [institutional redemptions] puts significant pressure on the BTC rate since issuers are forced to sell the asset to cover withdrawal requests,” MEXC COO Tracy Jin told COINOTAG.
Conclusion
As Bitcoin grapples with extreme market sentiment and unanticipated sell-offs, analysts remain divided on the near-term trajectory of prices. While the M2 Money Supply model predicts a potential rally, immediate realities of market liquidity and investor behavior suggest that volatility will continue to be a significant factor in Bitcoin’s performance. Traders should remain vigilant, prepared to adapt as changing market conditions unfold.
