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Bitcoin fell from an all-time high in January 2025 to $80K, leading to widespread fear in the market, the first significant correction since the US presidential election in November 2024. In this article, we help you decipher the reasons and what to expect next.
Disappointment toward strategic Bitcoin reserve leads to earlier profit realization
The announcement of a proposed US Bitcoin strategic reserve, which was anticipated to boost investor confidence, turned out to be less impactful than expected. Analysts noted that it’s merely a repackaging of seized assets, which didn’t provide the strong catalyst for recovery many had hoped for.
Monetary and fiscal uncertainty
Persistent inflation has led to increased caution among investors. With inflation rates rising again since January 2025, the market has become more cautious about stagnation.
Higher inflationary expectations regarding the Federal Reserve's monetary policy changes have contributed to market volatility. Anticipation of interest rate cuts has substantially fallen, which has prompted institutional investors to reduce their exposure to risk assets, including cryptocurrencies, as reflected in the continuous capital outflows from spot ETFs.
Last but not least, recent US tariff policies have raised concerns about economic slowdowns, adding to fears of a recession and further pressuring the crypto market. The Consumer Confidence Index (CCI), a barometer of economic growth, showed a sharp drop in February 2025, leading to fear of a potential economic downturn.
Investor sentiment
Investor sentiment plays a crucial role in the cryptocurrency market, and recent trends indicate a significant shift toward fear and uncertainty.
The crypto fear & greed index has dropped to a nearly three-year low of 10, reflecting heightened investor fear. Historically, such low sentiment levels have preceded market bottoms, suggesting that while the current downturn is severe, it may also present buying opportunities for contrarian investors.
The market saw substantial liquidations last week, with over $637 million wiped out in a single day. Leveraged trading has exacerbated this selling pressure since many traders have been forced to close positions as prices fall, further driving prices down.
The cryptocurrency market is known for its volatility, and corrections are a natural part of its cycle. Bitcoin, for example, has seen a significant drop from its peak of $109,000 in January 2025 to around $78,650 as of Mar 11, 2025, marking a nearly 25% decline. Such corrections are common in crypto, where prices can fluctuate dramatically within short periods.
Analysts are closely monitoring key support levels. If Bitcoin fails to hold around $78,000, it could fall further to approximately $71,000 to $72,000, which is seen as the top of the pre-election trading range. This technical analysis indicates that the market is still in a correction phase within a broader bull market context.
The recent downturn in the US stock market, with equity falling 20% from its previous high, has been mirrored in the crypto space. As stock market futures have fallen sharply, cryptocurrencies have also experienced declines, indicating a growing risk-off sentiment among investors, who should thus look at the increasing correlation between BTC and equities.
Ongoing global economic concerns, including geopolitical tensions and potential recessions, have increased investors' caution, resulting in a broader sell-off across various asset classes — including cryptocurrencies.