Analysts Weigh In: Will Bitcoin Bounce Back or Face a Further Decline?

Bitcoin has recently experienced a 24% decline from its all-time high — what does the future hold? Analysts indicate that BTC is “very close to its local bottom,” but could an unexpected event trigger a further decline?

Macro Turmoil Affects Bitcoin

Bitcoin (BTC) has had a tumultuous journey. After reaching a record high of $109,114 in January, during President Donald Trump’s inauguration and the subsequent pro-crypto policies of his administration, the market has been on a downward trajectory.

As of March 13, Bitcoin is trading at approximately $82,600, marking a 24% decrease from its peak in January, having dipped to a four-month low of $76,600 on March 11.

The market is facing several challenges. Wall Street is adopting a more risk-averse attitude, concerns regarding a U.S. recession are mounting, and new tariff policies initiated by Trump have contributed to the overall uncertainty.

Investor sentiment has been dampened by the lack of new BTC acquisitions under the Trump administration’s strategic reserve plan, which had raised hopes for a continuous influx of Bitcoin purchases.

On the macroeconomic side, inflation data released on March 12 provided a temporary boost. The consumer price index rose by merely 0.2% in February, leading to an annual inflation rate of 2.8% — down from 0.5% in January. The core CPI, excluding food and energy costs, also fell to 3.1%, its lowest since April 2021.

This lower CPI data sparked initial optimism in the market, pushing Bitcoin above $84,000, while altcoins saw significant gains. The S&P 500 and Nasdaq 100 also witnessed modest upticks.

However, this optimism was short-lived. As the day progressed, both BTC and equities gave back much of their gains, hindered by the intensifying tariff disputes between Trump and key trading partners.

In a decisive move, Trump imposed a 25% tariff on steel and aluminum imports from Canada, prompting retaliatory tariffs from Canada on $21 billion worth of U.S. goods.

Shortly after, the EU announced its own retaliatory tariffs, totaling $28 billion on U.S. products, further escalating trade tensions.

These developments have left investors feeling anxious and motivated a shift towards a risk-off perspective, with cash and safer assets like gold and bonds becoming more attractive compared to volatile options such as Bitcoin.

As these dynamics continue to unfold, Bitcoin is at a crucial crossroads. Will it stabilize and gear up for another upward trend, or might a more significant correction be on the horizon? Let’s delve deeper.

Institutional Money Withdraws

Since February 13, spot Bitcoin ETFs have faced significant headwinds, with capital rapidly exiting the market. While there have been brief instances of positive inflows, they pale in comparison to the considerable outflows seen on most days.

The highest outflow occurred on February 25, when ETFs experienced their largest single-day exodus—a staggering amount exceeding $1 billion, clearly indicating a risk-off sentiment among institutional investors.

Despite these outflows, as of March 12, BlackRock’s IBIT continues to lead the ETF space, managing nearly 568,000 BTC. It’s followed by Fidelity’s FBTC and Grayscale’s GBTC, with 197,500 BTC and 196,000 BTC, respectively.

Compounding this situation is a political angle, as at least six members of Trump’s cabinet hold Bitcoin, either directly or indirectly through ETFs.

Among them, Health and Human Services Secretary Robert F. Kennedy Jr. has revealed the largest stake, with a Bitcoin Fidelity crypto account valued between $1 million and $5 million.

Treasury Secretary Scott Bessent possesses between $250,001 and $500,000 in BlackRock’s iShares Bitcoin Trust ETF. Despite his intention to divest within 90 days, his holdings highlight the rising association between Bitcoin and high-level U.S. policymakers.

Meanwhile, Bitcoin’s open interest—an important metric that indicates the total value of outstanding BTC derivative contracts—has been trending downward.

After reaching a peak of $70 billion on January 22, following Bitcoin’s latest all-time high, open interest has steadily declined. As BTC’s price decreased, OI also fell, hitting a low of $45.7 billion on March 11, the same day BTC recorded its four-month low.

However, in the last two days, open interest has shown signs of recovery, gaining over $1 billion by March 13, in conjunction with BTC’s price increase.

The notable ETF outflows and decreasing open interest suggest a hesitance from institutional players and a reduction in speculative activities over the past weeks.

Bitcoin’s rise in January was propelled by robust ETF inflows and high-leverage strategies, but as macroeconomic uncertainties and Trump’s trade conflicts escalated, the market adopted a more cautious stance.

The recent uptick in open interest may signal that traders are tentatively re-entering long positions, though the recovery process remains slow. A sustained increase in both OI and ETF inflows will be pivotal for Bitcoin to regain its prior momentum.

Historical Trends Suggest a Rebound

Bitcoin’s recent downturn from its all-time high has been substantial, yet historical trends and technical indicators suggest this might either be a temporary low or the start of a more extensive correction.

Technical analyst CryptoCon highlights that Bitcoin has now returned to historically low RSI Bollinger Band % levels, a region where BTC typically does not linger for long.

To elaborate, the Relative Strength Index (RSI) measures momentum, while Bollinger Bands reflect volatility. When the RSI Bollinger % hits extreme lows, this indicates Bitcoin is in an oversold condition, hinting that downward pressure may be easing.

In past cycles, instances when BTC touched similar RSI Bollinger % lows often heralded a strong local bottom before a rebound.

As per CryptoCon, Bitcoin has recently completed Phase 4 in the market cycle, characterized by prices breaking through previous all-time highs—a scenario seen in January 2013, December 2016, and November 2020.

In each of these cycles, BTC experienced a correction following the breakout but rebounded to new highs within the next 9 to 12 months.

He theorizes that the current market cycle displays traits reminiscent of March 2017, where BTC experienced a significant pullback but eventually recovered and advanced further. If this pattern holds, it suggests that a peak in the cycle could still be several months off.

However, this hopeful outlook is not universally accepted. Doctor Profit, another esteemed analyst, outlines two potential scenarios for BTC’s future path.

In a standard market situation, BTC’s local bottom is anticipated to settle between $68,000 and $74,000, as supported by the Market Value to Realized Value indicator.

The MVRV indicator evaluates whether Bitcoin is overvalued or undervalued by relating the current market price to the average acquisition cost of all circulating BTC.

Currently, the MVRV indicates that BTC is approaching a solid bottom zone, suggesting limited downside risk unless significant adverse developments occur.

Here, the risk of a Black Swan event presents itself. Initially, Doctor Profit regarded a Black Swan event as unlikely, but recent economic conditions—featuring Trump’s aggressive tariff strategies, global trade war concerns, and widespread recession fears—have made him uncertain.

A major global economic downturn, a financial crisis, or a serious collapse in the crypto industry could push Bitcoin significantly lower, potentially targeting $50,000. While he still favors the first scenario, he is no longer dismissing the possibility of an overarching market collapse.

The indicators present a polarized perspective. Bitcoin’s historical patterns suggest this is a healthy retreat before another upward movement; however, global conditions have rarely been this uncertain.

In the meantime, investors should exercise caution, keep an eye on critical support levels, and brace for heightened volatility.

Although historical data leans toward recovery, markets do not function in isolation, and external disturbances can overshadow even the most dependable technical indicators. Always invest only what you can afford to lose.