Bitcoin Slumps as Traders Brace for Further Declines

Bitcoin (BTC) is facing increased selling pressure, dropping 20% from its all-time high following Donald Trump’s inauguration. Investors are now hedging against a further decline, with put options at $70,000 seeing significant open interest ahead of Feb. 28 expirations.

Bitcoin’s Slide & ETF Outflows

• Bitcoin fell 5% to $84,075, marking four consecutive days of losses.
• Other major cryptocurrencies like Ethereum (ETH) and Solana (SOL) dropped 9-10%.
• ETF outflows surged, with investors pulling over $1 billion from spot Bitcoin ETFs on Tuesday, the highest since the ETF debut in January 2024.
• Fidelity Wise Origin Bitcoin Fund (FBTC) and BlackRock’s IBIT led the outflows.

Market Factors Driving Bitcoin Lower

Several key factors have contributed to Bitcoin’s recent slump:

1. Declining Demand for Bitcoin ETFs

• Bitcoin’s ETFs saw $2.1 billion in total outflows over the past six days.
• Investors unwound long positions in Bitcoin’s perpetual futures, causing liquidations of $2 billion in bullish bets.

2. Rising Concerns Over Tariffs & Inflation

• Trump’s aggressive tariff policies are dampening investor sentiment.
• Short-term inflation expectations remain high, adding to risk-off behavior in the market.

3. Aftermath of Bybit Exchange Hack

• Last week’s record-breaking Bybit hack shook the crypto sector, leading to increased selling pressure.
• Ethereum and Solana have been hit hardest, as trust in centralized exchanges weakens.

“The Bybit hack has negatively impacted sentiment, exacerbating Bitcoin’s decline,” said Chris Newhouse, Director of Research at Cumberland Labs.

Options Data Suggests Further Downside Risk

• Bitcoin’s put options at $70,000 now hold the second-highest open interest for the Feb. 28 expiry.
• Investors are increasingly hedging downside risk, signaling fears of further declines.

What’s Next for Bitcoin?

• Risk-off sentiment dominates, with traders awaiting a new catalyst for a bullish reversal.
• Market participants are rotating out of crypto, preferring safer assets amid economic uncertainty.
• A recovery may depend on renewed ETF inflows, regulatory clarity, or a shift in macroeconomic conditions.

“The crypto market needs a new catalyst to reverse this bearish sentiment,” said Ravi Doshi, Co-Head of Markets at FalconX.