The cryptocurrency market, including Bitcoin, is at risk of a sharp decline due to recent economic developments. The announcement of new tariffs by the US president has led to a wave of fear and uncertainty in the market, resulting in significant pullbacks in Bitcoin, stocks, and fiat currencies.
This reaction is not unexpected, as the last time tariffs were imposed, investors withdrew liquidity from the market, leading to a bearish outcome. The correlation between the S&P 500 and the crypto market suggests that Bitcoin may experience a difficult weekend.
Several signs point to a higher probability of downside risk for Bitcoin. The price has retested its short-term declining trend line, and sell pressure is already evident. Additionally, Bitcoin bulls have been rejected at the 50% RSI level, and the price has been trading at $97,364. A resurgence of sell pressure may push the price towards $91,000, where it will retest support.
The appetite for leverage in Bitcoin has also decreased significantly due to economic uncertainty. This has been accompanied by an uptick in the Bitcoin long-term holder SOPR, indicating a sizable sell-off from long-term holders. The latest market data shows that spot flows have remained negative, with over $113 million in outflows in the last 24 hours. Demand in the derivatives segment is also in the red, with exchange flows revealing higher inflows than outflows, indicating more sell pressure than demand.
Despite the current uncertainty, there are signs that Bitcoin’s long-term prospects remain positive. Several states are introducing bills to allow Bitcoin to be used as a strategic reserve asset, indicating growing acceptance and changing government sentiment around the cryptocurrency. Maryland is the latest state to introduce such a bill, highlighting the growing trend of Bitcoin acceptance at the regional level.
