Why Bitcoin Took a Nosedive — And What to Expect Next

Hey there, fellow crypto enthusiasts,

If you’ve been following Bitcoin’s price action over the last couple of days, you’ve probably noticed the market’s mood has shifted from euphoric to… well, let’s just say, less than stellar. As someone who’s been through more than a few crypto cycles, I can tell you this: the market’s recent dip isn’t just a random blip — it’s a story of interconnected factors, human psychology, and a dash of geopolitical drama. Let’s break it down together, shall we?

The last 48 hours have been rough for Bitcoin, and a big part of that can be traced back to something unexpected: a Chinese AI startup called DeepSeek. This company has been making waves by developing a cost-effective AI model that’s outperforming giants like ChatGPT. Sounds impressive, right? Well, not if you’re a U.S. tech investor.

The fear that DeepSeek could disrupt the dominance of U.S. tech companies sent shockwaves through the Nasdaq, with futures dropping sharply. And since Bitcoin has become increasingly correlated with tech stocks, the crypto market felt the ripple effects. As eToro analyst Simon Peters put it, this was AI’s “Sputnik moment,” and the risk-off sentiment hit Bitcoin hard.

Another factor contributing to the downturn is the behavior of Bitcoin’s long-term holders (LTHs). These are the folks who’ve held onto their BTC through thick and thin, often seen as the backbone of Bitcoin’s stability. But recently, data shows a spike in LTH activity, with many choosing to sell their holdings.

This isn’t just about profit-taking — it’s a signal that even the most steadfast believers are feeling the pressure. When long-term holders start moving their coins, it often precedes a bearish phase. As BeInCrypto noted, this shift in LTH balances has added significant selling pressure to the market.

Let’s not forget the Federal Reserve. With the FOMC meeting just around the corner, investors are on edge. Historically, riskier assets like Bitcoin tend to face sell-offs ahead of such events, as traders de-risk their portfolios. This time is no different.

The big question is whether Fed Chair Jerome Powell will adopt a dovish stance or stick to his guns. If the Fed signals higher-for-longer interest rates, it could further dampen sentiment in the crypto market. As crypto analyst Miles Deutscher pointed out, this pre-FOMC de-risking is a normal part of the cycle, but it doesn’t make the price drops any less painful.

Remember the excitement around President Trump’s executive order on crypto? Yeah, me too. But here’s the thing: the market’s initial optimism has fizzled out. While the order did create a working group to explore a crypto stockpile, it fell short of the bold moves many were hoping for.

This disappointment has left a vacuum of bullish catalysts, and as TradingView noted, the lack of fresh momentum has contributed to Bitcoin’s recent decline. It’s a classic case of “buy the rumor, sell the news.”

If there’s one thing that amplifies Bitcoin’s price swings, it’s leverage. Over the past two days, we’ve seen a wave of long liquidations, with over $850 million wiped out across the crypto market. These forced sell-offs create a vicious cycle, pushing prices even lower.

As CoinGlass data shows, the largest single liquidation order was a whopping $98.46 million on HTX. Ouch. When traders get margin-called, it’s not just their portfolios that suffer — it’s the entire market.

So, where do we go from here? While the short-term outlook might seem bleak, it’s worth remembering that Bitcoin has weathered far worse storms. The Network Value to Transaction (NVT) signal suggests that Bitcoin is currently undervalued, hinting at potential for recovery.

If Bitcoin can hold the $100,000 support level, we might see a bounce. But if it breaks below, the next key level to watch is $90,000. Either way, this dip could be an opportunity for those with a long-term perspective.

Looking ahead, the crypto market is likely to remain volatile as it navigates a mix of macroeconomic and technical factors. Here’s what we can expect in the coming days:

The Federal Reserve’s upcoming meeting will be a key driver of market sentiment. If the Fed signals a dovish stance, we could see a relief rally. However, a hawkish tone might prolong the sell-off. Institutional interest in Bitcoin remains strong, with spot Bitcoin ETFs continuing to attract inflows. Any significant changes in ETF activity could influence Bitcoin’s price direction.

The Trump administration’s pro-crypto policies are expected to bring more clarity to the market. However, the pace of regulatory progress will be crucial in determining investor confidence. The Fear & Greed Index is currently in the “Greed” zone, suggesting that investors are optimistic but potentially overextended. A shift to “Fear” could indicate a buying opportunity.

As I sit here typing this, I can’t help but reflect on how far we’ve come. Bitcoin’s journey has never been a straight line — it’s a series of peaks and valleys, each one teaching us something new. The last two days have been a reminder that the market is as much about psychology as it is about fundamentals.

So, whether you’re HODLing through the storm or looking for an entry point, remember this: Bitcoin’s story is far from over. The dips are part of the process, and they make the highs that much sweeter.

Disclaimer: This post is for informational purposes only and not financial advice. Always do your own research before making any investment decisions.