Bitcoin price has been in free-fall since the last day of January, despite previous optimism about its potential to push into new highs. Current market conditions suggest that the market could be losing confidence, leading to capitulation.
The declining confidence in Bitcoin was perfectly encapsulated in the Fear and Greed Index. To give a rough idea of the market sentiment shift, it dropped from 60 to 44 in the last 24 hours. One of the sharpest drops observed in such a brief period in recent times.
The sudden shift from geed to fear comes just days after the Federal Reserve hosted its latest FOMC meeting. The Federal Reserve revealed plans to slow down its monetary easing citing reduced need.
Investors saw this as a sign to pullback from risk-on assets such as Bitcoin. Interest rate cuts previously paved the way for heavy liquidity injection.
Is Bitcoin price near its cycle top?
The Federal Reserve’s stance on interest rates has investors wondering whether this could mark the end of the latest liquidity cycle. As such, the crypto market is on high alert with some analysts already predicting a cycle top soon.
A recent CryptoQuant analysis stated that Bitcoin is within its current bull cycle top range. This suggests that Bitcoin may not necessarily push too high past its current ATH. Many have taken this as a sign to cash out and may explain the latest wave of sell pressure.
However, the CryptoQuant analysis also pointed out that it may take more than three months for the late stage of the Bitcoin top to play out. In addition, it will also be characterized by liquidity rotation.
This suggests that Bitcoin dominance may soon start declining, paving the way for altcoin season. Bitcoin dominance has been rallying as price action declined, managing to push above November 2024 levels.
Bitcoin dominance soared as high as 64.34% in the last 24 hours. The last time it was that high was in March 2021, after which it experienced a sharp decline, within the 2 months leading up to its 2021 top.
Weekend sell pressure sees BTC dip below $92,000
The loss of confidence among Bitcoin investors was particularly strong this past weekend. Price dipped by 13% from last week’s peak at $106,447 to as low as $91,530 on Sunday
Price also pulled back to a historically significant support level. A strong bounce back above $94,000 at the time of writing. This signaled that there was a noteworthy accumulation at the aforementioned support zone.
The same support line has been in place since the third week of November last year. If Bitcoin dips below the same level, it could lead to an intensive unwind of the liquidity that supported its November rally.
Such an outcome is characteristic of major pullbacks that usually occur during the highly volatile phases of the market.
